Forum Brief: Budget - Housing

The chancellor has announced that he is to freeze stamp duty on homes and business property purchases.

Gordon Brown also used the budget to reveal that he has asked Kate Barker, formerly of the CBI, to examine and report on reducing barriers to increased housing supply.

David Miles, professor of finance at Imperial College, will also be examining the case for, and how, Britain can develop a market for long-term fixed rate mortgages.

A spokesman for the Office of the Deputy Prime Minister told ePolitix.com: "The government is determined to deliver thriving, sustainable communities across the country. This budget will help provide the high quality homes people need where they need them."

Forum Response: Consumers' Association

Sheila McKechnie, director of the Consumers' Association, said: "Consumers' Association welcomes this major review of the housing market in the UK and looks forward to contributing to it. Anything that enables greater certainty in financial planning is to be welcomed in principle.

"However, this will not be easy to deliver in practice as the industry has struggled in the past to deliver fixed rate products that combine certainty with flexibility, instead using huge redemption penalties to lock consumers into expensive mortgages."

Forum Response: British Property Federation

Ian Fletcher, director of commercial and residential property, said: "Holding stamp duty rates will come as relief to our industry at what are challenging times. We have been mounting a campaign to illustrate that higher rates of stamp duty hurt some of the government's key objectives of pension provision, regeneration and enterprise. We welcome that the government appears to be listening and furthermore is offering stamp duty relief in disadvantaged areas.

"The one fly in the ointment is the proposals announced today on lease duty. We welcome the further consultation on this, because we believe the proposals run totally contradictory to one of the government's other key objectives, which is raising productivity.

"The exemptions for small businesses are a start, but productivity could suffer in other businesses as they will have a greater disincentive to move to more efficient premises. We will be pushing that point as the proposals are consulted on further over the coming months."

Forum Response: Federation of Small Businesses

John Walker, chairman of the FSB, said: "The re-structuring of stamp duty is clearly designed to raise revenue as well as combat tax avoidance. It will result in increases in real terms, but small firms will be relieved by the exemption on leases of up to £150,000. We will be watching closely to ensure that this exempts 60 per cent of property deals as the chancellor has promised."

Forum Response: British Retail Consortium

Bill Moyes, director general of the BRC, said: "It is good to know that the Treasury have listened to the retail sector, especially at this time of weakening consumer demand.

"After a sustained, targeted campaign by the BRC, the announcement means the level of increase has been minimised, 60 per cent of commercial transactions have been exempted and the introduction has been delayed to give time for further consultation.

"This is especially good news for small retail businesses and look forward to further meaningful dialogue with the Treasury on the issue."

Forum Response: Nationwide Building Society

Philip Williamson, chief executive of Nationwide, said: "A review of Stamp Duty is long overdue. The chancellor has missed an opportunity to give first time buyers a better chance of getting on the property ladder.

"Back in 1993 first time buyers benefited from more realistic levels of Stamp Duty as well as mortgage tax relief. These days it is much more costly - the chancellor has missed the chance to redress this balance."

Forum Response: Council of Mortgage Lenders

Michael Coogan, director general of the CML, said: "The CML is pleased that the chancellor did not raise stamp duty, and is particularly pleased that double stamp duty on Islamic mortgages will be resolved. But the CML would have liked to see the thresholds raised, and continues to believe that longer term fundamental reform away from the existing 'slab' structure of stamp duty is needed.

"On fixed-rate mortgage funding, the CML looks forward to the report by David Miles on the market for longer-term fixed-rate funding in the UK. The CML also welcomes the review of housing supply, as increased supply underpins the success of the recently-announced Communities Plan.

"Probably around a third of outstanding mortgages are either fixed or capped. Most of these are short-term fixes. Fixed-rate mortgages give consumers greater certainty about their payments, but rates are typically higher, because the cost of long-term funding to lenders is also higher. In the UK's dynamic and innovative market, consumers often choose other products such as discounts and trackers.

"Such products are less widely available in other European countries. Essentially, the debate will be about whether cheaper funding can be achieved for longer-term fixed rates in the UK, while not losing the benefits of flexibility that appeal to UK consumers."

Forum Response: Shelter

Adam Sampson, director for Shelter, said: "Shelter welcomes the changes to housing benefit announced in the budget which could help alleviate and prevent homelessness and bad housing.

"The end of the need to reapply for housing benefit every six months or whenever someone takes up employment should see a reduction in time spent processing housing benefit claims. This will make it less likely that tenants will get into arrears while their claims are processed. These measures, together with changes reducing the amount people lose in benefits when they take up employment, will also end the disincentive many people face to work.

"Housing benefit is a mess. Delays caused by mind bogglingly complex regulations are causing people to get into debt and at risk of homelessness through no fault of their own. When offered work it is often not worth their while to risk debt due to benefit delays for what may only amount to a few extra pounds each week.

"These changes to housing benefit are a step towards a safety net that helps people out poverty."

Forum Response: National Association of Estate Agents

Julie Westby, president of the NAEA, said: "The idea that the chancellor has been benign in freezing stamp duty on house sales is nonsense. The last time you could find a property for £60,000 was in mid 2002 in Yorkshire and Humberside according to the Nationwide Building Society. Currently the average UK house price is £120,000 and hasn't been £60,000 since the middle of 1997.

"In other words the freeze Stamp Duty is really a tax rise - and one which will now affect many first time buyers who will find themselves immediately having to pay tax for their first property.

"The National Association of Estate Agents recommends a gradual system with total exemption below £100,000, which we believe more accurately reflects the rise in property values over the last few years."