Recently appointed Chancellor of the Exchequer, Philip Hammond, will address the nation tomorrow in his first fiscal announcement, where he will outline the government’s spending plans for the year ahead.
The Chancellor takes on the task of addressing the uncertainty that the UK faces in the aftermath of the EU referendum – as well as establishing his plans to ‘reset’ the Government’s economic policy ahead of the UK’s European exit.
Following a sustained barrage of taxes and restrictions on the UK property market over the last few years, UK property investors are looking to the Autumn Statement as an indicator of how Theresa May’s post-Brexit government is looking to address the housing market.
In the quest to cut the deficit and raise funds, former chancellor George Osborne turned to the property market with a new tiered stamp duty system, the restriction of mortgage tax relief and the creation of an additional 3% surcharge on buy-to-let or second home purchases.
Since his appointment, industry bodies, estate agencies and property investors have petitioned Mr Hammond to reverse the stamp duty hikes and re-embrace the old taxation system – will the Autumn Statement see the measures revoked?
PrinvestUK has analysed all of the pre-Statement announcements, speculation and indicators to find out just what the Autumn Statement may mean to the UK property market.
“At the Autumn Statement in November I will set our plan to deliver long-term fiscal sustainability, while responding to the consequences of short-term uncertainty, and recognising the need for investment to build an economy that works for everyone” – Philip Hammond at the Tory party conference Birmingham 3rd October.
In his speech at the Conservative Party conference last month, the new chancellor dropped Mr Osborne’s austerity agenda in exchange for higher spending in public infrastructure, instead stating that the government needed to address the “long-standing productivity challenge in this country”.
Whilst he has declared no intention of targeting a surplus by the end of this Parliament, a goal set by his predecessor, he has indicated that “the task of fiscal consolidation must continue” as the UK faces further economic uncertainty in the years ahead.
Assuming a pragmatic approach, Mr Hammond has already stated his hopes to get Britain living within its means whilst ensuring that the UK's output increases across all industries as the nation prepares for the challenge of a post-Brexit Britain.
The chancellor is expected to focus the majority of his spending on building productivity levels as well as improving infrastructure across the UK, with a smaller proportion of the additional funds also being allocated to the government's social policy agenda by offering giveaways to working class families.
“I want to make sure that the economy is watertight, that we have enough headroom to deal with any unexpected challenges over the next couple of years, and most importantly, that we’re ready to seize the opportunities of leaving the European Union. That means improving the productivity of our economy so that we can compete in the world” – Philip Hammond on BBC’s Andrew Marr Show on Sunday 20th Nov.
A central theme to this years’ Autumn Statement is likely to be investment in public infrastructure, with the Chancellor expected to announce a £1.3 billion spending package to tackle traffic across Britain.
The scheme will include £1.1 billion to reduce congestion and upgrade roads across the country and £220 million to resolve pinch points on England’s motorways and major roads.
Also, the Chancellor is expected to announce the green-light for the £27 million rail project proposed by the National Infrastructure Commission’s (NIC) to connect Oxford, Milton Keynes & Cambridge, in the hopes of fostering a new UK “Silicon Valley” along the corridor.
By allocating more money for improving the standard of Britain’s public infrastructure, the UK is set to become more attractive for both domestic and foreign investors, as more areas will benefit from affluent economic growth – creating further investment opportunities in the UK.
“[…] It is very clear to me that as we move on from being members of the European Union to earning our living in the wider world, we do need to address the long-standing productivity challenge in this country, and that means investing in R&D, it means investing in economically productive infrastructure, it means investing in skills” – Philip Hammond on BBC’s Andrew Marr Show on Sunday 20th Nov.
At the Conservative party conference in Birmingham last month, Mr Hammond also mentioned that he had no intention to cut Corporation Tax to 15% by 2020 - reneging on the pledge made by George Osborne in March’s Budget.
He restated his commitment, however, to lowering the tax to just 17% by 2020 from its current level of 20% - making the UK an even more attractive business location for global corporate firms.
The move is expected to elevate Britain’s position in its future negotiations with leaders from other countries, and could result in a higher number of UK commercial property transactions and a rise in employment figures over the long-term.
"At 20%, we have a highly competitive Corporation Tax rate. And as it falls to 17% over the next three years, it will be more attractive still." – Philip Hammond at the Tory party conference Birmingham 3rd October.
Measures have already been announced by Mr Hammond and Communities Secretary Sajid Javid to tackle Britain’s housing shortage.
These include a £3 billion Home Building Fund, which will help build more than 25,000 new homes throughout this Parliament and up to 200,000 in the longer term.
The government projects that the fund will help to create thousands of jobs, providing loans to small and medium enterprise builders and funding for offsite construction and essential infrastructure.
Nonetheless, estimates by global estate agency Savills highlight a need to build 300,000 houses per year to make up for years of undersupply – indicating that the Home Building Fund is unlikely to succeed at resolving the current demand/supply property imbalance.
"Currently traditional housebuilders take too long to build houses – so government will take direct action, using surplus public land to build faster, including by encouraging new developers with new models into housebuilding." - Communities Secretary Sajid Javid at the Tory Party Conference in Birmingham on October 3rd.
Analysis show that stamp duty reforms, established by Mr. Osborne, actually resulted in lower property transactions and an estimated loss of 14,000 jobs, according to Oxford Economics.
Research by other industry bodies, such as the Royal Institute of Chartered Surveyors (RICS), consolidate the argument that tax hikes for landlords have worsened the current shortage of rental homes and that they should be scrapped in the upcoming Autumn Statement.
Mr Hammond, however, has given no indications on whether he intends to answer such calls and reintroduce the old taxation system.
Considering that the chancellor has previously stated his readiness to “reset” the Government’s economic policy, it is possible that he will not only announce huge investment schemes in a bid to pre-empt any economic slow-down post-Brexit, but also a series of micro-economic measures, such as tweaks to the tax system, that can impact the revenue returns of UK property investors.
By turning away from the austerity measures that defined David Cameron's leadership, as well as trying to prepare the country for the upcoming exit from the European Union, Mr Hammond seems likely to focus on the ongoing issue of productivity in the UK, emphasising how increased output across all industries can better prepare the UK for its role outside of the European Union.
If you would like to know how Philip Hammond’s first Autumn Statement will unfold, as well as seeing all of the latest news and analysis from PrinvestUK, follow us on Twitter and tune in tomorrow, November 23rd, at 12 p.m (GMT) for our live coverage of the announcement.