On Wednesday, the Autumn Statement will be delivered by the Chancellor of the Exchequer, Philip Hammond. The impact of the changes may have significant impact on the property market, and various legal professionals have expressed their views on what they expect from the Statement in various respects.
Differing from the fiscal approach of George Osborne, Philip Hammond has chosen to abandon the promise to balance the accounts prior to this parliament’s term coming to a close. This gives Hammond the ability to borrow more, which may in turn increase the housing supply and make property more affordable in the long term.
Commenting on the potential boost to the housing budget was Nick Leavey. The partner and Head of Commercial Property at law firm Coffin Mew, also mentioned the potential improved chance of buy-to-lets being built as well as homes for first time buyers: “I expect that a new multi-billion housing package will be announced in the Autumn Statement. This will largely take the form of HCA loans used to back developers of all sizes and it is proposed that the Home Building Fund will be increased from £3 billion to £5 billion.
“Our developer clients in particular will be keeping an eye out for something to this effect.
“It is also anticipated that there will be a more balanced approach between building starter-homes and build-to-rents. Theresa May is reported to be more amenable to the latter than David Cameron was, however that probably won’t be popular whilst the 3% SDLT surcharge remains in place.”
In relation to the additional stamp duty land tax (SDLT), rumours have circulated that the measure could be abolished or that the burden of SDLT payment will be reversed from the purchaser to the seller.
Mr Leavey further expressed the negative impact he believed SDLT has had on the property market and that until alterations are made, developers and therefore buyers will continue to lack confidence: “Oxford Economics Research say that SDLT increases are backfiring with 2,000 fewer £1 million+ sales in the year proceeding the changes. This is having a wider impact on the economy – £8.3 billion hit to gross domestic product, a £450 million drop in wider tax receipts and the loss of 14,000-plus jobs.
“Many doubt the benefit of the SDLT changes for first-time buyers and are calling for Phillip Hammond to make changes to reverse these effects.
“Developers are less inclined to pursue higher-quality sites for fear that prospective buyers will be put off because of the SDLT rates (particularly for dwellings +£1 million).
“My view, therefore, is that, whilst the Government may seek to boost housebuilding via HCA funding for developers of all sizes, developers might not take the bait unless SDLT changes are promised in order to give prospective buyers confidence.”
As some transactions may be highly complex in nature, whether or not SDLT should apply may be open to interpretation. Provision of guidance surrounding SDLT to clarify application would therefore be of great benefit if included in the new Statement.
Spending related to infrastructure is highly likely to be included in the Autumn Statement. Hammond expressed that various market conditions make now a favourable time to invest whilst speaking in Washington: “Now is a good time to invest in genuinely productivity-enhancing infrastructure, and to take advantage of low borrowing costs and our ability to borrow.”
Although roads and railways are expected to receive a boost in spending, Hammond did state that this would not be a “fiscal splurge”.
Commenting on the focus of infrastructural spending was Nick Gross. The Chairman and Head of Transport and Logistics at law firm Coffin Mew expressed that the transport sector was likely to benefit: “There is more limited scope for tax cuts, and any spending initiatives must be carefully chosen. Mr Hammond has said that there won’t be a spending “splurge”, and that he wants to focus on “shovel ready” projects, which can deliver the quickest schemes, offering the highest economic benefits, and the greatest increases in productivity.
“In particular, Mr Hammond has signalled that any fiscal stimulus in the Autumn Statement would be concentrated on boosting Britain’s roads and railways. Good news for the transport sector.”
Gross went on to mention the focus of spending was likely to depend on locality due to the funds potentially being sourced from Local Authorities: “It is notable that, except for HS2 (which is increasing in predicted cost with every new announcement, and given the shift in policy may not be invulnerable from slashing or pushing back in the queue), much of the Government’s spending commitments are expected to be delivered via local bodies, such as the Local Enterprise Partnerships (through the Local Growth Fund), or via the Local Transport Majors for larger projects. However, money won’t be easy to come by – the current Local Growth Fund round is over-subscribed by five times, and in last year’s Autumn Statement the Department for Transport’s operating budget was slashed by 37% – the biggest drop for any Government Department – so there’s ground to make up.
“Therefore, we can expect spending in the transport sector to be focussed on local requirements, with perhaps those who shout loudest (and, in relation to the Local Growth Fund, those who are pushing on with local devolution), getting priority. A patchwork solution seems to await.
He concluded by mentioning the unlikelihood of Heathrow’s new runway being included in the Statement, despite the attention it’s received: “Despite the fanfare accompanying the announcement of the new Heathrow runway, the time lag and groundwork involved in getting this project up and running suggests that it is unlikely to feature heavily in the Autumn Statement.”