Summer Budget 2015 – The Reactions
Following announcements in today’s Summer Budget, as delivered by George Osbourne, we bring you the reactions from a range of experts within the property industry.
We also welcome your thoughts and initial reactions, and invite you to leave a comment in the comment section at the end of the article.
Key announcements of note relating to housing measures within the latest Budget include:
- Mortgage interest relief for buy-to-let landlords restricted to basic rate at 20%
- Inheritance tax (IHT) relief threshold raised to £1 million
Responding to the Chancellor’s announcement today of changes to the tax reliefs for buy-to-Let landlords Eddie Goldsmith, Chairman of the Conveyancing Association, says:
“The Chancellor’s decision today to restrict Mortgage Interest Relief to 20%, the Basic Rate of tax, is certainly a major reform which is likely to have far reaching implications for the market. The popularity of purchasing property to rent has grown exponentially, with our members undertaking more and more buy-to-Let transactions. This has increased further with the pension freedom reforms and has been a key element in keeping the housing market buoyant.
“We are encouraged that the Chancellor has recognised the need to deliver this change in a proportionate and gradual way, and will delay the changes until 2017. Restricting the tax relief could make it easier for first time buyers, and the Association certainly supports the Government’s wider reforms including the Help to Buy ISA. However the Chancellor must ensure that the right balance is struck, avoiding a negative effect on the availability of rented accommodation or higher rents.”
Mark Hayward, Managing Director, National Association of Estate Agents (NAEA), comments:
“We fear that Osborne’s decision to raise the inheritance tax relief threshold to estates worth <£1m could have unintended consequences on helping buyers move up the housing ladder.
“Increasing the inheritance tax relief threshold will create tax incentives for estate holders to remain in one property for longer periods of time, thus leaving less affordable housing available for buyers. We urge the Government to carefully consider actions that will upset the balance between supply and demand further. This will have a knock-on effect on those lower down the property chain. The ability to own a home is an aspiration built within our psyche, and the Government needs to act to ensure that first time buyers are not driven out of the property market once and for all.”
Andy Knee, Chief Executive of LMS comments:
“The restriction to Buy-to-let tax relief is a serious blow for landlords, which is likely to reduce their appetite for gearing within their portfolios. However, the move is likely to be welcomed by First Time Buyers who may find securing their chosen property a little easier as a consequence. Rising house prices in London and the areas around the commuter belt have created a generation of squeezed renters, unable to save enough for a deposit on a first home, who find that limited housing stock, a falling turnover of homes, and competition from tax subsidised landlords has barred them from the market. Reducing these subsidies won’t solve the housing crisis, but it does shift the playing field a little in favour of first-time buyers. Of course, landlords can reduce the impact of the Chancellor’s tax-grab by ensuring they have the most competitive mortgage deal on each and every property in their portfolio and this could lead to a remortgage bonanza for brokers and lenders alike.
“Increasing the Inheritance Tax threshold will allow richer households to pass on a greater chunk of their savings pot to children and grandchildren, primarily benefitting those in London and the South East but of little gain to anyone outside these areas. While those who downsize maintain an Inheritance Tax ‘credit’ thereby encouraging wealthy older people to free up larger houses, this could still lock out those young people without a hefty inheritance or financial backing from their parents.”
David Cox, Managing Director, Association of Residential Letting Agents, comments:
“In a bid to limit the growth in buy-to-let properties, the Chancellor has announced plans to reduce the amount of tax relief investors can claim on mortgage interest payments. At a time when the supply of rental property is already struggling to meet demand, it is dangerous to try and reduce growth in the rental market.
“The Chancellor has also replaced the wear and tear costs to a new system that means landlords can only deduct the exact amount that they will incur. However, the unintended consequence of this, and the reduction in income tax is that landlords will seek to recoup their costs by hiking up rents. As a result, tenants will have to save for longer to be able to afford a deposit for a house, as more of their income will be eaten up by rent. This creates a vicious circle where tenants are renting for longer because the hope of owning a home becomes less achievable. The Government needs to think about the market more holistically and while the rental market remains such an important tenure, we need to find the right balance between landlord taxation and tenant aspiration.”