The budget was announced from 1230 on 19 March 2014. This is an initial response to the budget. While it seeks to be accurate, the budget is itself not always a wholly accurate statement and some of the policies announced may not in fact come into force. Therefore some care should be taken when making decisions based on it without further investigation.
The announcement that new home incentives, and particularly the help-to-by scheme, will be continued to 2020 offers a mixed position for the sector. More building will mean more property becoming available and some of this will work its way into the sector. At the same time easier access to homes will mean that some tenants will seek to purchase and so move out of the sector. Large Housing Associations that were planning to move into the private sector are already scaling back their plans in the belief that the drive to home ownership will undermine the sector. The same concerns may apply to smaller landlords and may mean that the interest in family homes will wane for the sector as this is the area likely to be most heavily impacted by the help-to-buy scheme.
There will be new homes built in Barking Riverside and a regeneration in Brent Cross.
The announcement of a new garden city in the Ebbsfleet area may see a rush to invest in this area and will certainly interest agents that are established or who might like to be established in the area. Any city will need to have a mix of accommodation choices and there is likely to be scope for the PRS to be involved. A prospectus will be published on new garden cities and so the door is open to further new cities in the future.
The benefit caps will continue. This will mean that there will continue to be a cap on Housing Benefits. This will cause frustration for landlord faced with tenants who are unable to afford or refuse to top-up their benefit payment to the agreed level. This will continue to leave landlords with the decision to either accept a lower rent figure or seek to evict.
Stamp Duty Land Tax
The NAEA made its common pre-budget statement that it wanted the stamp duty system reformed.
The Chancellor certainly did not listen. He further acted to close the loophole which allows for transfer of property via the transfer of a corporate entity. A penalty rate will now apply to these transfers which should largely stop this method of bypassing SDLT. The tax on properties with value of over £2 million will be expanded to cover properties with values of over £500,000.
A further £140 million has been announced to help rebuild flood defences. This will be of interest to homeowners in those areas and will also make PRS investment in those areas slightly less risky.
In more general terms, a building economy with a greater degree of confidence must be good for the PRS. The question is whether this is sustainable or just a local blip. The government are of course clear that this is the start of the recovery. If that is the case then there is real hope for expansion in the PRS. Greater stability in employment and expansion of the workforce are key elements for any landlord in property investment decisions.
This is a relatively neutral budget for the PRS. However, taken in the context of the support for business it is slightly disappointing. There is little for larger landlords and almost nothing for smaller landlords. At least they can drown their sorrows with a slightly cheaper pint!