A budget for property?

Was that the most exciting budget for property for a decade? Something for everyone with an interest in the housing market I think – He gaveth and he took’eth away (does that work?) in equal measure but where does this leave us?

Today’s budget will provide greater demand but put downward pressure on house prices over the longer term. Releasing more land and the potential switch of some commercial property, a presumption in favour of certain planning applications and the changes to Stamp Duty Land Tax (SDLT) for bulk purchasers will all help to increase transaction volumes of residential property and developers will see the prospect of new buyers coming into the market as a reason to take the mothballs from some of their schemes.

Lenders will be smiling as they appear to have convinced the Chancellor of the wisdom of propping up the housing market by making £250m available to help first time buyers get into a market that the lenders themselves expect to drop this year. However this is expected to help ‘just’ 10,000 buyers out of the anticipated 2.4m who will buy over the life of this Parliament. Small beer.

The increase in costs for non-doms together with action to tighten up clever accountants schemes to avoid Stamp Duty Land Tax changes on 6th April may depress the top end of the market but in recent days the flood of Middle Eastern interest into the Central London market will overwhelm this. Fear for your life easily outweighs any concern one might have over the health and long-term value of London Property.

I expect house builders and developers to be the principal losers from the changes being made to the planning system. The dynamic duo of Shapps & Pickles at the Communities & Local Government department plan some of the most radical changes to the planning system in England and Wales for thirty years. Whilst some will build more the flood of new land and ex-commercial property will provide unwelcome competition for their existing schemes. Shares in commercial property companies may be volatile as the full implications are realised.

The next 12 months will be a nervous time for those in property. With transaction volumes last month just half what they were in Feb 2007 (72k vv 142k) the residential market needs cardiac massage. I remain uncomfortable with the interventionist actions of the Government especially with regard to the help for first time buyers but unlike the last Government, this one should at least be applauded for doing something rather than tinkering around the edges.

What remains unclear is whether we can expect to see a slight fall in values this year as many commentators were suggesting or a full blown crash as the market accepts that fundamentally house prices are still too high and that lending criteria is not going to change a great deal to compensate.

I would like to buy a new Aston Martin but despite such low interest rates I am pretty sure that I can’t because they are so expensive, not that I just can’t afford to borrow the money.