Savills responds to detail for housing in today’s Budget

22 November 2017

"It is encouraging to see so much focus on housing in the Budget, with a combination of carrots and sticks designed to boost housing delivery, including to encourage developers to build out more quickly, build more densely, boost land release, etc,” says Lucian Cook, Savills head of residential research. 

 

The one demand-side initiative, the stamp duty cut for first time buyers, is the one measure that comes into effect immediately, while it will take time for the supply-side initiatives to bear fruit.

 

Even greater ambition and immediacy is needed on the supply-side if we are going to make real progress towards solving the housing crisis.

 

Stamp duty change: abolished for first time buyers up to £300,000

 

Lucian Cook, Savills head of residential research says:  "This is definitely a case of ‘every little helps’.  It isn’t possible to borrow against stamp duty, so this will temper some of the pressure on first time buyers at the time of completion, but does not impact the real challenge – that of the deposit requirement, particularly in higher value markets.  This may just encourage the bank of mum and dad to help out more, safe in the knowledge that their cash is not going to the Treasury." 

 

Against an average first time buyer deposit of £25,652 across the UK the maximum £5,000 saving on stamp duty looks significant, but against the average £99,753 deposit requirement in London it is far less so.

 

SDLT savings:

 

House Price

Previous SDLT

New SDLT (FTBs only)

Saving

£150,000

£500

£0

£500

£200,000

£1,500

£0

£1,500

£250,000

£2,500

£0

£2,500

£300,000

£5,000

£0

£5,000

£350,000

£7,500

£2,500

£5,000

£400,000

£10,000

£5,000

£5,000

£450,000

£12,500

£7,500

£5,000

£500,000

£15,000

£10,000

£5,000

 

As the OBR calculations acknowledge, there is a risk that this translates into slightly (+0.3%) higher house prices.

 

Scotland has its own LBTT system.  Faisal Choudhry, head of research, Savills Scotland says :  Stamp Duty exemption for first time buyers should also be extended north of the border, although the average first time buyer price in Scotland is about £120,000, which makes it exempt from LBTT. However, in the city areas of Edinburgh and Glasgow this is probably much higher. For example, a £200,000 first time buyer purchase price with LBTT exemption could save them £1,100, which helps in the current climate of high deposit requirements.

 

On Oxfordshire-Cambridge ‘growth corridor

 

Comments from David Jackson, head of planning at Savills:

The Chancellor's backing of the ambitious plans for the corridor are to be welcomed as investment in infrastructure is key to unlocking the full potential of this sub-region.  In Oxfordshire, it is an important step for the Government to endorse the 100,000 homes target, which the Oxfordshire Growth Board agreed in 2014, as it is only this level of delivery that will start to address the chronic shortage of homes in the county.' 

 

The 100,000 homes in Oxfordshire is, interestingly, far in excess of the standardised housing need approach figures.  This is because it is aligned with economic development plans, something the Government could do more to encourage alongside the standardised approach.

 

300,000 new homes target

 

David Jackson, Savills head of planning:

'The confirmation of a national housing target of 300,000 homes per year is welcome and is in line with the research that Savills has undertaken and published earlier this year.  However, it is not clear from the measures that the Chancellor announced how it is intended to get from the current 217,000 net additional new homes per year to that target.  Indeed there is now an inherent contradiction between the national target and the standard methodology for assessing housing need, on which the government has just concluded a public consultation, which indicated a national target of 266,000 homes.  Clearly there is some work the Government needs to do to get the ambition to align with the methodology.'

 

Continued focus on brownfield land over greenbelt review

 

Emily Williams, Savills research analyst says:

There was a strong statement of intent from government to commit to averaging delivery of 300,000 homes per year in England by the mid-2020s. The Budget also promises a new approach to strategic planning in the South East. This needs to include London if it is to have any impact.

 

It is also positive that there is recognition that there needs to be increased land supply in the places where there is highest demand for homes. As we outlined in Planning to Solve the Housing Crisis? there is an annual shortfall of over 80,000 consents for new homes in the highest-demand areas.

 

However, it is questionable whether these ambitions can be realised under the proposals set out in the Budget, particularly through the focus on densifying brownfield sites. London delivered 39,000 net additional dwellings in 2016-17, but has a housing need of 90,000-100,000 new homes. The city already prioritises brownfield development and intensification, as it has in every iteration of the London Plan since 2004. In 2015/16, 98% of all units delivered were on brownfield land and 56% were on sites that exceeded the recommendations in the London density matrix.

 

This suggests there is very limited capacity to increase delivery while sticking to this policy. Instead, consideration should be given to Green Belt release in areas surrounding existing transport hubs. 60% of London’s Green Belt is within 2km of an existing rail or tube station. Selective release of land in these areas would allow for increased sustainable housing delivery in locations already connected to economic centres.

 
 

Key Contacts

Lucian Cook

Lucian Cook

Director
Residential Research

Head Office London

+44 (0) 20 7016 3837

 

Sue Laming

Sue Laming

PR Director
Press Office

Head Office London

+44 (0) 20 7016 3802