UK Property - Commentary from Liam Bailey, head of residential research at Knight Frank on the pre-budget report.
Stamp Duty: -
Ending of the Stamp Duty holiday from 31 December 2009 will weaken demand at the entry level of the market
Knight Frank calculate that approximately 25,000 house purchases in 2010 will be delayed or postponed as a direct result of the ending of the Stamp Duty holiday
Bonus Tax: -
The impact of the new one-off Bonus Tax will be negligible in terms of the wider housing market. Prices are unlikely to fall - even in London - as current price levels have not been bid higher in recent months in anticipation of bonus money which is now not going to be paid out.
There will be an impact on housing transactions, which are likely to drop slightly, as some purchases in 2010 would have followed the receipt of a hefty bonus.
The real impact will be felt in the longer term. There is a risk in terms of the impact on the economy and the housing market of another seemingly ad hoc, politically driven tax change. We have seen several in the past few years and cumulatively they risk weakening the attractiveness of the UK and London as places to do business.
House-building sector: -
There was some interesting recognition of the negative impact caused by the increasing range of development costs (which have resulted from legislation formulated during the boom) are having on the house-building sector, at a time when the market is struggling into recovery mode. The list includes the Zero Carbon Homes policy, Lifetime Homes Standards, a scaled back Section 106 regime to be phased in after the introduction of the Community Infrastructure Levy. Nothing has been spelt out yet but there appears to be a willingness to concede that not all of these costs are sustainable.
General comment: -
The Pre-Budget report was a non-event in many ways. There was no clear guide provided as to how the UK's public debt is to be reduced in a substantial way. All of the really important decisions are now delayed until after the next election. The inference is that there is some more pain to come in terms of tax rises, over and above what we have seen today, but there is much, much more to be announced in terms of public spending cuts.
Courtesy: Knight Frank Residential Research
For further information, please contact:
Liam Bailey, head of residential research, Knight Frank,
+44 (0) 7919 303 148
Davina Macdonald Lockhart, pr manager, Knight Frank,
+44 (0) 7796 996 154