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“Industry Reacts as Chancellor Seeks to Put Economy “Back on Track” in Autumn Statement”

Posted 27th November 2023 by ctatax-admin

Cornerstone Tax is the UK’s leading property tax advisers, specialising in Stamp Duty Land Tax. We’ve reclaimed over £15 million in overpaid SDLT in the last 12 months. Contact us for stamp duty advice, or to see if you are eligible to claim a refund from HMRC on overpaid Stamp Duty.

 

Read the article on Property Notify

Amid the highest tax burden since the second world war and sky-high mortgage rates, the Chancellor Jeremy Hunt has delivered an Autumn Statement that seeks to put the UK economy “back on track”.

David Hannah, Group Chairman of Cornerstone Tax comments:

“The Chancellor needed to use this opportunity to provide liquidity support to the construction industry to enable them to build speculatively and increase the housing stock more rapidly in this country.

The decision to commit an additional £110m to deliver nutrient mitigation schemes to unlock 40,000 new homes in cities including London, Leeds and Cambridge is positive news.

Earmarking £32m to address the planning backlog and beginning a consultation to allow any house to be converted into two flats marks an important step in freeing up the rental sector’s supply problem, potentially easing the strain felt by both landlords and tenants.

At another level the crisis in the private rental sector, could have been eased by removing the second home surcharge from bona fide private rental sector investors giving them a reduction in their acquisition costs and also reinstating full relief for mortgage interest payments in common with other businesses that have to borrow money to provide their services.

This double measure would have both reduced the costs of purchase, whilst allowing landlords to freeze, or even potentially cut, rents which have had to have both these penal measures “costed in” over the last few years.

It would also stimulate purchases in the market at a time when owner occupiers are unable to purchase because of affordability issues.

The above would have provided a robust solution to providing homes, stimulating the property market at the lower end and restoring what has been a politically motivated but economically disastrous strategy from a government that, as little as 14 years ago, was begging the private rental sector for help during the crash.”

Co-founder and CEO of Searchland, Mitchell Fasanya, commented:

“Great to see the government’s commitment to delivering much needed new homes by way of nutrient mitigation schemes, freeing the planning backlog, and local authority fund investment.

This certainly goes against the previous head in the sand approach that’s been adopted when it comes to actually addressing the housing crisis by improving supply rather than fueling demand.

Of course, we’ve heard many promises of a similar vein before and so we can be forgiven for welcoming today’s news with a degree of scepticism.”

CEO of Yopa, Verona Frankish, commented:

“Last Christmas, the government gave us property market turmoil as a consequence of the mini budget.

This year, they’ve saved us from further tears, but they haven’t given us much else to shout about.”

Director of Benham and Reeves, Marc von Grundherr, commented:

“Another underwhelming Autumn Statement where the housing market is concerned.

Much like unwrapping a pair of socks on Christmas Day, it lacked imagination and left us feeling largely disappointed.

It’s clear they have run out of ideas when it comes to addressing the current issues plaguing the property market. Hardly surprising when we have housing ministers coming and going more frequently than the postman.”

CEO of Octane Capital, Jonathan Samuels, commented:

“Today’s budget was a missed opportunity to help kick start a property market that has been looking a tad lethargic of late.

Higher mortgage rates and wider market uncertainty have caused the market to cool as a result of a drop in buyer activity and we were hoping that the government would offer up an incentive to entice them back into the fold.”

Managing Director of House Buyer Bureau, Chris Hodgkinson, commented:

“We’ve grown accustomed to the government announcing housing market incentives designed to fuel demand and so an absence of any such initiative today will come as a shock.

Instead, they’ve uncharacteristically decided to address the burning issue of supply.

While this will do little to ignite the property market in the short term, it will be beneficial in the long run, provided they actually deliver on their promises.”

William Matthews, head of commercial research at Knight Frank, said:

“With high inflation having first lifted government receipts, and falling inflation now driving expectations of base rate cuts next year, it was always going to be tempting for the Chancellor to use some of this headroom to ease the tax burden.

For commercial real estate a few macro announcements stand out. First, a number of business-friendly measures should be supportive of future investment and, ultimately, occupational demand for real estate.

Second, increases to benefits and pensions above inflation, and the national insurance cut, add to consumer spending power.

Third, while light on detail in the speech, the focus on increasing FDI, in line with the recommendations of Lord Harrington’s recent report, could help attract more capital to the UK.

Much has been made of the improvement to government finances and improving growth prospects for the UK, but it should be recognised that this backdrop and outlook is changeable, and subject to global macroeconomic shifts that are not always in any Chancellor’s gift to control.”

Flora Harley, Head of ESG Research at Knight Frank, said:

“The chancellor’s announcement of grid and connection improvement plans which will ‘cut grid access delays by 90% and offer up to £10,000 off electricity bills over 10 years for those living closest to new transmission infrastructure,’ is welcome news.

The grid has been an impediment to housing development as well as renewable energy deployment.

We will be looking at the detail of these plans, but anything to help unlock the gridlock will be a step in the right direction.

This comes after Ofgem approved proactive queue management (from 27 November), which should remove stalled projects and ‘allow ready-to-go generation and storage to enable net zero’ to be ‘fast-tracked.’ All positive momentum.

The £4.5 bn of support announced over the five years to 2030 to attract investment into strategic advanced manufacturing and green energy sector is another step in the right direction and signals a commitment to net zero.

This, combined with improvements to the grid connection process, will hopefully drive the investment in renewable energy.

Which, in turn, will help to decarbonise the electricity grid, a vital step in lowering operational emissions from buildings, where they are fully electrified.

However, it is noted that the level is around 1% of the US’ Inflation Reduction Act.

There were omissions however in terms of energy efficiency of buildings, despite the mooted partial stamp duty rebate for new homeowners who make their properties more energy efficient within two years.

The energy efficiency of UK homes is such a big part of the net zero puzzle.

Stamp duty measures have been pointed to as a potential impactful lever because it impacts at the point of purchase – a time when renovation often takes place.

This measure had explicitly been put forward within the UKGBC’s ‘Mission Retrofit’ report.

This could be a missed opportunity to provide more of a ‘carrot’ rather than ‘stick’ approach for homeowners.

Another missing component was any news on the implementation of more stringent Minimum Energy Efficiency Standards for non-domestic buildings, having scraped measures for the private rented sector in September.

In the 2021 consultation it had originally been mooted that in 2027 and 2030 the minimum EPC required for a non-domestic building to be let would be raised from EPC E currently to C and B, respectively.

However, last month in the government’s response to the Climate Change Committee report, they noted that “the proposed timelines within the original consultation will require updating to allow sufficient lead in time for landlords and the supply chain.”

Meaning the dates are likely to be pushed back but they are said to “be publishing in due course” the detail.

As ever, clarity is needed for owners and occupiers.

Whilst it has been accepted that regulations will be tightened to raise the energy efficiency of buildings, the timeline uncertainty will not help the sector to act.

Regardless, the demands from occupiers for more sustainable buildings continues to drive investor focus.”

Nicola Gooch, Planning Partner at Irwin Mitchell, comments:

“We have a promise of full cost recovery for major business-related planning applications – provided that the application is determined within the statutory timescales.

If not, then there would be an automatic fee rebate.

This will require yet another amendment to the Fees Order, which is a little surprising given that it is about to be amended, with increased planning fees coming into effect on 6 December 2023.

The ‘prompt service or your money back’ guarantee does not appear to relate to residential planning applications, so will likely only affect a very small proportion of planning applications in any one local planning authority.

If these changes to planning fees are limited to non-residential applications, then there could be unintended consequences.

It could result in commercial applications being prioritised over housing schemes, where the planning application fee would not be set on a costs recovery basis and the risk of a refund would be lower.

There has also been a promise of more money for nutrient mitigation schemes – to help unblock 40,000 homes that are currently held up by nutrient neutrality issues; as well as funding to tackle the ‘planning backlog’ and deliver new homes in Cambridge, London and Leeds and more money for the Local Authority Housing Fund.

If this is genuinely new money, this will be very welcome indeed. However, the key test will be whether the new homes, or the mitigation schemes required to release them, are actually delivered.

We have also been promised yet another consultation on new permitted development rights.

This time to allow the conversion of a house into two flats if there are no changes to exterior of the building.

This will continue a long-running trend of expanding the scope of permitted development rights in England and will add to the eleven planning related consultations that we have had in the last twelve months – most of whom are still awaiting a response.

The promise to cut grid access delays for renewable projects will come as a huge relief to the sector, but whether financial incentives will make residents more accepting of new transmission infrastructure remains to be seen.”

David Cracklen, Director of AJC Group, comments:

“With the current challenges facing the housing industry, and especially the Small and Medium Enterprise (SME) housebuilders, we would’ve hoped to have seen more support announced in the budget.

The UK is experiencing an unprecedented housing crisis and shortage of affordable homes, with no, to very little support for first time buyers.

Changes to Stamp Duty Land Tax (SDLT) would have potentially helped those in a position to buy, however for those who require affordable housing, which has significantly risen in recent years, this would not have the desired effect.

What needs to happen is reforms to the planning system, in order to enable housebuilders across the board, and especially SMEs, to increase their output.

The £32 million that the Government has pledged to speed up planning only applies to London, Cambridge and Leeds, there needs to be support provided across the country.

As outlined in the House Builders Federation (HBF) ten point plan, improvements need to be made in the planning process.

Currently, there are too many obstacles to jump with planning, and really the Government should allow for any validated planning applications to proceed, without needing to include any new guidance notes that are passed by local authorities.

The rules applying to water neutrality and Biodiversity Net Gains need to be assessed, and like the HBF have suggested in the ten point plan, the Government actually needs to work with the industry to stop the disproportionate impact on developers.

Costs for submitting planning applications are already at an all time high and are set to rise by 35% by the end of the year.

This added with the already challenging cash flow pressures, many housebuilders will be lucky to make it through the year.

As highlighted in the ten step plan by the HBF, if the costs of planning are going to be increased, there needs to be more resources available to make it worthwhile and justified, otherwise the Government will risk wiping out the SME housebuilders altogether.”

Paula Higgins, CEO of HomeOwners Alliance, comments:

“We hope that making it easier to convert houses into flats will boost private rentals and create more right sized homes.

Our research has shown that 46% of downsizers say that a lack of suitable housing is a barrier to them moving.

But the government doesn’t have a good track record on extending Permitted Development Rights.

The quality element can be missing and is too often not up to standard, as we have seen with these office to flat conversions.

Standards need to be maintained as deregulation in this area does mean a greater risk of bad conversions – for example, minimum space standards are often not adhered to.

And unlike when you buy a new home, buyers of these conversions will not be given a warranty.

Potential buyers will need to be educated about the risks and an independent survey will be a must.

Newly converted flats without planning permission should be required to be subject to more stringent building control checks.”

Jeremy Leaf, north London estate agent and a former RICS residential chairman, comments:

“All of the planning measures mentioned by the Chancellor are welcome. One of the issues in both the sales and lettings markets is the lack of choice, which is partly to do with a shortage of supply.

Any measures which seek to alleviate that shortage will help to keep not just prices but rents, which have been rocketing, in check.

However, we need more meat on the bone – when are we likely to see a difference and what is the timescale for their introduction?

The housing market is crying out for more activity which is good for the economy generally bearing in mind the knock-on effect to so many businesses.

We would have liked to have seen more direct help to encourage landlords in particular to stay invested and add to their portfolios, bearing in mind so many are providing accommodation for tenants on housing benefit on behalf of local authorities.

Affordable accommodation remains in short supply, particularly affordable rental accommodation and there are no signs that this will change any time soon.”

Tomer Aboody, director of property lender MT Finance, comments:

“With multiple tax cuts and incentives, the Chancellor might be holding back some further help, particularly for the property market, until his next Budget.

This would provide a further boost to the economy and potentially offer a last chance to increase support before the general election.

Overall, this was a positive Statement which will hopefully help the many.”

Anna Clare Harper, CEO of sustainable investment adviser GreenResi, comments:

“This Autumn Statement was a missed opportunity to show that housing supply and home energy efficiency are really priorities.

The quality and affordability of homes, and the carbon emissions associated with those homes, are urgent environmental and social problems.

They have been discussed widely as policy priorities. However, this Autumn Statement failed to use the most effective lever, incentives, to create meaningful change.”

Jatin Ondhia, CEO of Shojin, comments:

“Housing could not be overlooked today, not after Labour had made such a point of championing housebuilding as a key part of its election campaign.

Hunt struck some positive notes, such as plans to make it easier for councils to fast-track applications for infrastructure projects, and potentially making it easier for houses to be converted into flats.

But overall, this was a lacklustre statement for the property sector, with little of substance to excite those building, buying and investing in UK real estate.

In the longer-term, at least, I welcome the decision to adopt the recommendations from Lord Harrington’s foreign direct investment.

We must ensure the UK remains a hub for global investments, so any action to incentivise and remove friction from international investors seeking out opportunities in Britain is a step in the right direction, and the real estate sector could be a major beneficiary.”

Paresh Raja, CEO of Market Financial Solutions, comments:

“You cannot begrudge the Chancellor’s focus on supporting businesses and consumers with tax reforms, but from the perspective of the property market, it was a somewhat uninspired and unimaginative statement.

Speeding up the planning process and potentially making it simpler to convert houses into flats will be welcomed by some landlords, investors and developers, but more detail is required.

Meanwhile, a more drastic overhaul of the planning system seems to have been abandoned, which feels like an important oversight.

The lack of meaningful property-related announcements is disappointing, given there had been rumours of stamp duty cuts over the weekend.

Today was a real opportunity to breathe life into the market and help catalyse growth at a time when economic markets are gradually improving, but that opportunity was missed.”

 

Cornerstone Tax is the UK’s leading property tax advisers, specialising in Stamp Duty Land Tax. We’ve reclaimed over £15 million in overpaid SDLT in the last 12 months. Contact us for stamp duty advice, or to see if you are eligible to claim a refund from HMRC on overpaid Stamp Duty.

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