‘Budget for housing’? Who’ll be able to buy one after Hammond’s feeble offer?

This Writer certainly won’t be rushing out to the estate agents after Philip Hammond’s Budget speech.

As Labour’s housing spokesperson, John Healey, tweeted:

Instead, Mr Hammond announced that he is scrapping Stamp Duty for first-time buyers.

This was the stand-out “rabbit-from-a-hat” in this year’s Budget statement. And it is no good to anybody apart from those who own houses already.

Here’s the explanation, from the Office for Budget Responsibility:

It says: “Eligibility criteria match those of the post-crisis ‘stamp duty holiday’… HMRC published an evaluation part way through that holiday. It concluded that the majority of the value of relief fed through to higher house prices and that it “has not had a significant impact in terms of improving the affordability of residential property for FTBs [First-Time Buyers]. It is estimated that most of the buyers who benefitted from the relief would have purchased property in its absence anyway (i.e. are deadweight).

“As with the post-crisis holiday, we have assumed that the consequence of introducing the relief will be to increase house prices – in this case by around 0.3 per cent… Prices paid by FTBs would actually be higher with the relief than without it.”

Let’s have some comments from informed sources. Here‘s Politics Home:

“The OBR went on: “The costing assumes a small number of additional first-time buyer purchases (around 3,500) but that these will displace other purchases by those who would have bought and paid the main rate of stamp duty.

“”It is also possible that non-first time buyers will abuse the relief. The measure is expected to increase house prices. It receives a high ‘uncertainty’ rating.””

The article added: “Shadow Housing Secretary John Healey mocked Mr Hammond saying on Twitter that it “must be a new record for unravelled budget: big stamp duty announcement demolished by OBR before Cx finishes his speech.””

Only around 3,500 additional first-time buyer purchases? How does that add up, then? Like this:

The Daily Mirror expanded on this: “According to the OBR projection, the stamp duty cut will encourage a tiny number of people to buy a house – and as a result, the cost for each of them is nearly a million pounds. The rest of it is wasted, because the people who get it would have bought the house anyway.

“A million pounds.

“As the Resolution Foundation’s Torsten Bell points out, it would be much cheaper to literally build them a house each.”

Shadow Chancellor John McDonnell was scathing: “For all the fanfare on housing, today saw more tinkering in place of decisive action, with only one third of funding announced today genuinely new. The Chancellor announced no measures to directly increase house-building and, without that, lifting stamp duty for some will only drive up prices and benefit sellers, as the OBR have acknowledged.”

So, rather than make it easier to buy a house, the result will be the same as Help to Buy, the Osborne scheme from 2013 that was recently renewed – it will make houses more expensive.

So why do it?

The obvious answer is: To keep house prices high, even when (if?) hundreds of thousands of new houses are built.

We know that house prices have been allowed to rise, meaning homeowners now have a huge investment tied to the price of their property – but one that could fall in value if new, and cheap, houses are built.

If the value of housing falls, there will be a knock-on effect on the economy, as it means UK citizens will have less spending-power – there will be less money available, even if only in theory (as most people actually live in their houses, rather than using them as the financial investments that some Tories consider them to be).

The Tories are committed to building hundreds of thousands of new houses a year, so they had to find a way to keep prices sky-high.

But won’t the logical result of this be the creation of house after house that nobody can afford?

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5 thoughts on “‘Budget for housing’? Who’ll be able to buy one after Hammond’s feeble offer?

  1. NMac

    Rather than feeble, its just another crafty way of looking after the ever-decreasing numbers of Tory voters.

  2. Florence

    We need SOCIAL housing, not AFFORDABLE housing. With combined effects of benefit capping, and UC cuts to family budgets, no one who qualifies for benefits will be able to afford any housing except social rents, and not even those in many cases. . This is going to condemn many to perpetual “temporary housing”, in the new workhouse / tenements of HMOS and hotels, that are a modern version of the Dickensian rookery of South London.

  3. Neilth

    House prices are a con for most of us anyway. If you live in a house that you own it’s value only becomes relevant if you decide to sell or die. In the former the money you get is either less, more or equal to what you want to buy as a replacement. As all house prices generally move together then the relative differences are small. Ie if your house is worth £300k and you want to move to another property of equivalent value you will spend £300k plus the fees, stamp duties etc. If all house prices fell to one hundredth of their current value then your house is only worth £3k but that’s ok cos the house you were intending to buy is only worth £3k as well so no problem except you’ve still got to pay the lawyers, estate agents, surveyors etc.
    If you die then the value of the house goes to your heirs and can help put them on the property ladder.

    Massive house building will mean more competition to find buyers as there are more properties on the market. Buyers can negotiate more aggressively and push down prices causing your house value to fall and perhaps become negative equity. Ie worth less than the mortgage you’ve got on it. So if you do sell you’ve got to find the extra cash to pay off the mortgage as happened in the latter part of the last century.

    As prices fall speculators will step in to buy the now cheaper properties and rent them out and coincidentally eventually push prices back up due to scarcity of affordable homes to buy. Exactly why we’re in this housing crisis in the first place. But no matter the speculators will all do well out of it so that’s all right then.

  4. rotzeichen

    People were told the same thing about petrol prices when they climbed to record highs, that a tax reduction would help, forgetting that in market philosophy, the price will rise until people can’t afford to pay more. So reducing tax would not stop the increase in price.

  5. Ann Ford

    If no-one can afford the houses that are supposed to be built, the builders will either have to make them cheaper or not build. I think they will stop building.

Comments are closed.