Property and some UK Pre-Budget Report (PBR) highlights

These are a few highlights of today’s statement made by Chancellor Alistair Darling:

• Borrowing has been estimated to be £176 billion in 2010 and £140 billion in 2011
• A new ‘broadband tax’ of 50p per month is being introduced. Anyone owning a landline phone will be paying the new charge to help fund the nationwide installation of ‘superfast’ broadband to 70% of the population.
• While pensions will go up by 2.5% next April, the previous item (superfast broadband) will help to wipe out this benefit given that most people of pensionable age have a landline phone
• National insurance contributions are going up. From April 2011, all rates of NI (employee, employer and self-employed) will go up by an extra 0.5%. That’s on top of the 0.5% from the PBR of last year
• VAT will go back to 17.5% from January 2010
• 2012 will see the capping of contributions by the government to public service pensions for teachers, NHS, local government and civil service. According to the Chancellor, this will save around £1billion a year
• Banker’s bonuses: There will be temporary levy of 50 per cent on any individual discretionary bonus paid above £25,000. Alistair Darling said the banks, rather than the bankers, would pay the levy. This temporary measure comes into effect immediately and will cover bonuses paid between now and April 2010.
• The Stamp Duty holiday will end on 1 January 2010

Given that the property industry helps to drive the economy, this brief round-up of four property professionals’ comments on the Pre-Budget Report might help to clarify the effect of the end of the Stamp Duty holiday:

Charles McDowell

Charles McDowell, the prime London property consultant, buying and selling properties over £5mn in Kensington, Chelsea, Belgravia and Knightsbridge, said:

“This lame duck budget is basically political posturing prior to election.  The current Government’s war on the City does nothing but diminish tax revenues and highlights the continuing value of property as an important asset class, particularly if inflation begins to rise. The old adage ‘safe as houses’ will be more relevant than ever in 2010.”

Immediately following Alistair Darling’s pre-Budget Report, Peter Bolton King, chief executive of the National Association of Estate Agents, said:

Peter Bolton King

“The Chancellor missed an open goal with his statement. By ignoring the advice of much of the property industry there is a real danger that the property slump that has hit thousands of families hard over the past 12 months will hit thousands more, harder, in the year ahead.
“Stamp duty unfairly distorts the property market. It is prohibitive to people looking for a step up the housing market and unfairly penalises people investing in buy-to-let portfolios.

“As a first step the Chancellor should keep the stamp duty threshold as it is when the current holiday ends in December. More importantly, the Government should commit to a complete reform of the tax to produce something that is fairer for everyone.”

John Phillips, Financial Services Director of Kinleigh Folkard & Hayward, stated:

John Phillips

“Whilst the return to a 17.5% VAT level from January 1st will push more money into Government coffers, it is not likely to help house buyers looking to access a mortgage.  People will have less money free to put towards saving for a deposit, and combined with a continued difficulty in obtaining lending, will not really help those looking to purchase property in 2010.

“The extension of the Mortgage Interest Relief Scheme by six months will be of little benefit to the housing industry.  Whilst it will provide much-needed security for those who own homes and who may be struggling financially, it is less likely to give an incentive to people in such circumstances who may have been considering selling their property. This will add to an already existent shortage of stock on the sales market.”

David Adams, Chesterton Humberts’ head of residential comments:
“The Government has produced a ‘steady as she goes’ pre-Budget report with eyes firmly on the horizon. This completely belies the reality that we are dead in the water and listing badly.

The large number of bankers who’ve been considering abandoning ship may now be persuaded that it is time to move off-shore and we could see a large number of country houses come to market out of season.

“The continuing record level of taxation on property transactions will go on depressing sales across the country. The London market will increasingly diverge from the rest of the country as foreign buyers continue to take advantage of the low pound to buy into prime central London property.

“What is bemusing is that we are selling properties of high tax payers and replacing them with foreign owners who aren’t paying any tax. Who will pick up the tab?”

David can be found on Twitter

© Stewart Andersen and Stewart Andersen’s Property Blog, 2009. Unauthorized use and/or duplication of this material without express and written permission from this blog’s author and/or owner is strictly prohibited. Excerpts and links may be used, provided that full and clear credit is given to Stewart Andersen and Stewart Andersen’s Property Blog with appropriate and specific direction to the original content.