There is a long list of measures which, were they to appear in this Wednesday’s Autumn Statement, would be regarded as a magical outcome for us real estate types.
For example: serious increases in the capital budget to fund infrastructure, which is both a facilitator of new development and a prerequisite for community acceptance of it; a reversal of the three per cent stamp duty surcharge on rented property, which we find is causing financiers to hesitate before building new rented housing – as much for the signal that it sends as its actual cost; an erosion of the cliff-edge arising from new business rates liabilities due in April 2017, which on present plans could cause tax bills to rise by as much as 45 per cent in one year; support for overstretched planning departments, which face a huge backlog of applications for permission and insufficient staff to make proper plans for the future; a proper long-term strategy to underpin housing supply, focused on the real reasons why communities are so resistant to new development.
I’m not saying that the Treasury has not done some good things for the property market over the last few years. It has. The mortgage guarantee element of Help to Buy was the right measure at the right time, providing confidence to the housing market at a difficult time. It had the desired effect the day it was launched. But it’s right that the chancellor has recently retired this instrument, as the problem in housing is no longer weak demand.
Similarly, the not-that-new Home Building Fund is a sensible offer of loan finance to builders and infrastructure providers. The amount of straight cash going into transport infrastructure has also been rising fairly steeply – even if never quite enough. The November 2014 reform of residential stamp duty to remove its distortionary banding structure was fair and principled, whatever one might think about the actual rates imposed.
So sometimes the Treasury gets things right. However, it is difficult to see how Philip Hammond will be so helpful to the property agenda in this week’s announcement: he is massively constrained by circumstances.
With less tax revenue likely in the post-referendum world, funding ambitious transport plans is going to be extremely tricky. Even scraping together the proposed £1.3bn increase (less than a tenth of the cost of Crossrail) will have been quite hard.
That said, a favourite Treasury trick is to promise more money, but not quite yet. For example, there was a significant increase in transport infrastructure budgets in the October 2015 spending review, but mostly allocated towards the end of the parliament rather than the beginning. So I’d predict more cash for rail and road in 2019 and 2020, and rather less now.
As the Crossrail project matures, hopefully we’ll see fresh commitments to projects like Crossrail 2 and extending the Overground. These projects matter because they open up land for the housing London sorely needs, as well as relieving congestion on the existing network. So the Treasury shouldn’t be allowed to snaffle the drop in spending arising from the end of the Crossrail project. But what the Treasury gives with one hand is takes away with the other.
The temptation to increase property taxes to help fund at least some this spending might prove too attractive to resist. However, the chancellor needs to be very careful about corporate tax: if, by his own admission, the economy goes into a weaker phase, he will need to take steps to boost business rather than undermine it.
Overall, we’re not expecting much property magic in the Autumn Statement, but not doing the wrong thing would be good enough for us. We’ll have to wait for a less preoccupied government for any significant reform.
So for now, this Autumn Statement is set to be property magic, postponed.