2018 budget: What Does That Mean For Housing?
The country now witnesses a twigged property market.
All thanks to the uncertainty around Brexit.
This will have effects on renters and homeowners.
The nation has attained a turning point in her recovery.
The Chancellor promised that the period of austerity would soon come to an end.
Budget measures were provided to deal with problems related to housing.
These measures included an increase in council house building and improvement of the assistance provided by the government to ‘Help to Buy’ scheme.
Several advantages for tenants and landlords come from this scheme.
For lots of shared-ownership buyers, the government removed stamp duty.
Moreover, a proposal has been submitted for a surcharge of 1% for non-residents.
This is for properties they buy in Northern Ireland and England.
Hammond also said promised to offer Housing Infrastructure Fund for councils an extra £500million.
This fund will make sure they build 650,000 new homes.
Therefore, what is the meaning of this?
Extension of Help Buy equity loan scheme till 2023
Generally, the Help to Buy scheme provides a 20% government (across the UK) to those who buy new properties.
The government loan is 40% for properties in London.
This equity loan will still be effective until March 2023.
Meanwhile, there will be an introduction of new regional price caps for eligible homes.
The scheme ought to end in 2021.
Nevertheless, the government extended it for two more years.
Also, there is now a change in the price caps for the eligibility for the Help to Buy scheme.
The cap is now 1.5 times of the average prediction for first-time buyer price tag in a location.
This shows that there is a significant difference in house price across regions.
In the North, the maximum price of a property that is eligible for the scheme will be £186,100.
In the South East, the maximum price will be £437,600. It will be £600,000 in London.
How the scheme works in London
For some experts, the boost is a great thing for developers.
This is because the developers will enjoy a certain stream of government funding for an extra two years.
A commentator mentioned that the scheme will now enjoy longer-term planning and building of new homes for renters.
In addition, it will ensure that potential buyers who are just saving to get a deposit to partake in this scheme.
However, other commentators have doubts over the benefit of the Help to Buy scheme.
According to a commentator, the benefits of the scheme are fewer than expected.
He noted that the scheme originally targeted individuals in lower financial positions.
However, more than one-third of those utilizing it make more than £50,000.
There is also evidence that many movers have used the scheme to upsize.
The commentator suggested that the new restrictions for making it beneficial for first-time buyers need monitoring.
This will ensure that only those that need it most will enjoy its benefits.
Building of houses
Since the era of Thatcher, there is a restriction for local authorities on borrowing to building new council housing.
At Tory party conference earlier this year, Theresa May said they remove the restriction.
Resultantly, 60 local authorities promised to utilize the new rules to build innumerable homes for their residents.
The new policy starts soon.
Undoubtedly, it could have a significant effect on housing problems.
Nevertheless, about £1bn will be added to the deficit by this additional borrowing to build homes.
The Local Government Association, however, argued that rent will return lots of the fund spent on social housing.
The association also noted that it will generate savings in the significant annual housing benefit bill.
Furthermore, the Chancellor promised the implementation of new measures for encouraging house building.
The measures include a fund for allocating lands for housing by neighborhood at discount and £653 million for partnerships that have nine housing associations.
Also, the British Business Bank will provide $1 billion in guarantees for smaller property builders.
In addition, £500 million to the Housing Infrastructure Fund will help local councils in building homes.
The fund is for infrastructures such as power supplies and roads within the new housing.
The fund would assist in building 650,000 homes.
The stagnation of the property market is the culprit for the higher stamp duty charges.
This is especially true for the expensive properties in London and the South East.
However, the current thresholds have not been changed.
The only change occurred to the charges meant for first-time buyers of shared-ownership homes.
The change means that those buying shared-ownership homes of up to £500,000 will not have to pay the tax.
This saving is applicable retrospectively for those who bought their homes from November 2017 to the moment.
The plan is to assist home buyers who are just climbing the housing ladder.
While the plan sounded great, some commentators were not particularly impressed.
These commentators are mainly those that aim at the higher end of the market.
They believed that the Chancellor has failed again to improve the market as a result of not dealing with the stamp duty.
They cited that stamp duty fees over the £937,500 threshold are adversely affecting the market.
There is also the 3% levy on second or multiple home purchases.
Stamp duty: increase for foreign buyers
Recently, Theresa May introduced a stamp subject of about 1 to 3% for foreign buyers.
Non-resident buyers in Northern Ireland and England will also have to pay extra 3% surcharge for second homes or buy-to-let houses.
The surcharge became effective from April 2016.
Estimation shows non-residents bought about 13% of new build homes in London.
Any revenue from these charges will into supporting a certain government strategy.
This strategy targets bringing homelessness to an end by 2027.
Nevertheless, there are still concerns about the extra tax.
This is to know how it will affect new housing investments in the UK.
Tax relief for homeowners
Today, home sellers do not have to pay tax on selling a home.
All they need to do is to ensure they have been residing in the home.
This rule is called private residence relief.
It covers home sellers who resided in their homes within 18 months before selling the property.
These sellers will be exempted from tax to show the problems associated with selling properties nowadays.
However, as from April 2020, this period of exemption would be lowered to nine months.
Also, the Budget changes lettings relief.
If the landlord has resided in the home, the capital gains tax can be up to £40,000 per owner.
Only a homeowner who resides in the property with the renter will gain from lettings relief.
This regulation will take effect by April 2020.
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