Key Points
- Strong growth in the housing market is unlikely to continue due to rising interest rates
- Just under 50,000 buy-to-let mortgages were redeemed last year
- The government has a goal of increasing housing delivery from 200,000 to 300,000 homes per year in England
Meanwhile, the mortgaged buy-to-let space looks set to drop dramatically. With an increasing tax burden and tightening mortgage regulation, it is becoming more difficult to turn a profit in this market.
There have already been signs that just under 50,000 buy-to-let mortgages were redeemed last year – evidence that landlords are shedding stock. This will create opportunities for cash investors in the short term, but longer term the lower buy-to-let supply could help boost the build-to-rent sector.
The housing market took centre stage in the Autumn Budget this year. Despite that, most of the policies the chancellor announced are unlikely to have much impact on the market for many years.
The main headline-grabber was the stamp duty exemption for first-time buyers. People buying a first home will save up to £5,000 off their stamp duty bill, as long as the property value is less than £500,000 (see table).
The excitement surrounding this announcement lasted about as long as it took to read the Office for Budget Responsibility’s policy assessment, which reported that the tax relief would feed directly into price rises, “thus the main gainers from this policy are people who already own property”.
Even if the stamp duty saving helps first-time buyers with completion costs, they still face the hurdle of building up a deposit. The average first-time buyer in London last year put down a deposit of £99,800, while in the southeast region, first-time buyers needed to save up £47,900.
Stamp duty exemption for first-time buyers
House price | Previous stamp duty |
| Saving | |
£150,000 | £500 | £0 | £500 | |
£200,000 | £1,500 | £0 | £1,500 | |
£250,000 | £2,500 | £0 | £2,500 | |
£300,000 | £5,000 | £0 | £5,000 | |
£350,000 | £7,500 | £2,500 | £5,000 | |
£400,000 | £10,000 | £5,000 | £5,000 | |
£450,000 | £12,500 | £7,500 | £5,000 | |
£500,000 | £15,000 | £10,000 | £5,000 |
Source: Savills
More houses
The Budget also cemented the government’s goal of increasing housing delivery from 200,000 to 300,000 homes per year in England. This is a step change in aspiration, and would help to improve housing affordability. But without firm policies and funding for this ambition, there is unlikely to see much growth in housing supply.
Strategic planning in growth areas, such as the Oxford-Cambridge corridor, will ease the critically low levels of housing affordability in that market. This is a great start, and we look forward to more strategic planning in areas with ambitious growth plans. But we will have to wait for those homes to be built before there is evidence of the impacts of those policies.
Without more to help ease affordability in the shorter term, it looks like the housing crisis will get worse before it gets better.
Lawrence Bowles is a research analyst in Savills’ residential research team
