Let none of us forget that you can say what you like about the unfortunate broken housing market and the undesirable high cost of living in London, but nevertheless, there is an inextricable link between the buoyancy of the residential market, retail spending and the growth of the UK economy.
In actual fact, when you look for reasons for the constrained UK growth it has nothing to do with the uncertainty of Brexit, but more to do with the loss of the stimulants. Quantitative Easing for example, which is no longer being used by the Treasury, the cost of money being higher than it was and the Residential Housing Market being in recession.
The former Chancellor Osborne, intoxicated with his own arrogance, thought that by hiking Stamp Duty to draconian levels, coupled with needless changes to Non-Dom residency, would be the Tory’s answer at the time, to Ed Miliband’s daft Mansion Tax proposals before the General Election of 2015.
Slowing down the Housing Market using sleeping policeman was a measured aspiration, but using stingers to achieve the same effect, was inept and crass. You could say, it was the ‘Ealing Comedy of Solutions’ rather than ‘Mission Impossible’.
What should one expect to happen when you double a property transaction tax?
I’m afraid the laws of unintended consequences applies here where today transactions are down by 50%, values by 25% and the ramifications of the slow down can be felt in many disparate industries, connected, directly or indirectly within the Residential Property Market i.e. surveyors, conveyancing solicitors, advertising companies, interior designers, white/brown goods retailers and a plethora of others.
In the post Brexit era we need as many stimulants and low regulatory hurdles, as we can get.
With the receipts from Stamp Duty down, certainly in London, let us learn from the famous American economist, Arthur Laffer, “Any tax that is too high, will be avoided by the canny investor.”
Remember that Stamp Duty is perfectly collectable but yet at the same time, perfectly avoidable…if you don’t move. Bring down Stamp Duty by at least 3% at the higher end and there will be more transactions as a result and more receipts for the Treasury.
If Mr. Hammond is so concerned about Mr. Corbyn’s left wing policies snapping at his heels and therefore, he cannot bring himself to reduce SDLT at the higher end, maybe he should consider legislating for buyer and seller to share this huge cost between them which would be a poor ‘Plan B’, but would certainly ease the pain for the buyer and one hopes, as a result, stimulate demand.
In order to increase the supply of housing, why not break the ‘Svengali’ link between local councillors and their partisan effect on the planning process.
It is riddled with petty political distractions and imperatives, which are preventing perfectly good residential development schemes getting through the labyrinthine process. Instead, the government should expand the Department of Environment (DoE), so that the trained inspectors will adjudicate not just planning appeals but planning applications, using planning criteria alone and not petty politics to drive just adjudications.
For instance, you cannot get councillors to make any meaningful decision on a notable planning application for six months before a Local Election and this is why distorted outcomes are a result of these impediments.
If these measures free up developments both in the Capital and elsewhere across the UK, more affordable and private housing will be built, which will help those most in need.
Councils should use the money gained by the Affordable Housing Contributions, to build more housing directly, or through housing associations. At the moment, affordable housing represents a paltry 1% of the UK supply of new homes and this needs to substantially increase, which will help repair the broken housing market.
In Margaret Thatcher’s day, with a much smaller population, 300,000 new homes per annum were built across the UK, as against a third of this in today’s world. This must be unconscionable.
Expand Help-to-Buy which, lets face it, is maintaining some element of liquidity in the lower price range of new developments, particularly in London.
It is intended that this government-backed scheme will come to an end in 2020, or before, and if it were curtailed, liquidity would dry up and the market in this sector would be in a parlous state.
Regulation in respect of mortgage applications is so draconian today that it is now taking months to process, which is adding to the illiquidity of the market place, particularly up to £1million, as chains of sales become longer and longer.
Mortgagees are ‘trussed up’ with so many bureaucratic requirements, that the cure is worse than the ailment.
Clearly, we don’t want to go back to the ‘Wild West’ where irresponsible loans were being given to unsuspecting, naïve, consumers, like confetti, but as is usual in these circumstances, when the clanking hand of government intervenes, invariably the pendulum swings wildly in the wrong direction.
The private rental sector is a vital component and a temporary refuge for some people, trying to raise a deposit to get on to the housing ladder. The draconian tax measures imposed on Buy-to-Let landlords, have resulted in a number of these investors selling their properties and, by doing so, restricting the private rental supply in certain sectors, which is having the unfortunate effect of raising rental levels.
This is working against the impoverished consumer, who can least afford to suffer this penalty.
Letting agents are being constrained by ever more restrictive, legislation and regulation, which usually ends up being to the disadvantage of the most vulnerable social groups.
The tax changes for Buy-to-Let landlords were far too severe in terms of Income Tax and SDLT and these need repealing. I know that it is politically unpopular to be seen to help ‘rich landlords’, but unless there is a healthy and liquid, private, rental sector, there will not be enough supply to satisfy demand and keep rental prices down.
Trevor Abrahmsohn is CEO and Founder of Glentree International, specialising in the luxury property markets in North London including some of the most expensive real estate in the world.