Before The Chancellor moved onto housing and the property market in his latest Spending Review and Autumn Statement, it was clear Londoners would have an interest in whatever announcements were made. What wasn’t clear was that London would be at the heart of the agenda with a three per cent increase in stamp duty on buy-to-let and second homes and an extension of the Help to Buy scheme to London.
The introduction of London Help to Buy can only be seen as good news for buyers across the Capital, particularly first time purchasers. With average prices varying greatly across the country a one size fits all approach to Help to Buy was inappropriate. Between April 2013 and June 2015 just 5.5% of all Help to Buy equity loans were provided to London buyers, so it is important this balance was addressed.
It is now vital for developers and house builders in London to ensure they are signed up to the scheme. The changes mean the average annual income required to buy in London is now £36,000 compared to £56,000 before[i]. As a result we expect demand for new homes to increase markedly when the scheme goes live in the new year.
Landlords and investors play an increasingly crucial role in London’s housing market with 37% of households in the Capital forecast to be privately rented by 2025[ii]. Many landlords and investors will feel penalised by the announced hike in stamp duty on buy to let properties and it may discourage ‘part-time’ landlords from investing in buy to let in the future.
However, we don’t expect any significant long-term impact to supply in the private rental market. What is likely though, is a flurry of activity among investors between now and April 2016 – when the hike comes into effect – and upward pressure on prices in early 2016 as a result. This rush of investor activity over the first quarter is likely to create more opportunities for first time buyers as competition from investors falls away immediately after the stamp duty changes.
[ii] Greater London Authority: THE MAYOR’S HOUSING COVENANT: Making the private rented sector work for Londoners