News: Budget Offers Little Hope Of Recovery

Wed, 23 Jun 10

The coalition government’s first budget has offered little hope of a speedy recovery in the housing market, according to property and lending experts.

Among measures announced by chancellor George Osborne was a rise in VAT from 17.5% to 20% from next January.

From this week capital gains tax has increased to 28% for higher and additional rate taxpayers. Also public sector pay for those earning more than £21,0000 will be frozen for two years.

The Council of Mortgage Lenders (CML) described the budget as tough on the housing sector, with rises in VAT and pay freezes set to have an impact on people’s ability to secure a home.

CML director general Michael Coogan said: “In the short term pain is likely, as the effect of tax rises on household finances dampens the already fragile recovery in house-buyers' confidence, housebuilding is affected, and support for housing costs across all tenures is curtailed.

"In housing terms this may be the age of inspiration but against an austere backdrop there is a long way to go before the supply of housing, or the ability of would-be home-owners to achieve their aspiration, are likely to show any significant pickup."

Jonathan Moore, director of Easyroommate.co.uk, says that the budget measures are likely to lead to increased demand for rented accommodation.

He said: “House prices have continued their upwards trajectory in 2010, and thousands of buyers cannot afford to get a foot on the housing ladder as a result.  With potential public sector job losses on the way in the autumn and the inevitable negative impact the VAT hike will have on businesses, the affordability gap is only set to worsen.”


By Joe Lepper

See also: Asking Price Index, House Prices and Trends by Town and Postcode, Mortgages, Life Insurance and Mortgage Protection Guide




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