With a distinct chill in the air and with only two days before Halloween, did an increasingly ghoulish-looking chancellor deliver more tricks or treats for the property sector?

Alastair Stewart

Certainly, there were plenty of goodies dangled in front of the wider housing sector well ahead of the Budget: a mooted extension of Help to Buy and the lifting of borrowing caps for council house building and, less palatable for many, another hike in stamp duty for foreign buyers.

But there was more time given to stale jokes on the topic of public loos in the Budget than to ‘Fixing Britain’s Broken Housing Market’ – a, if not the, key priority for the government other than Brexit. The big issue most housebuilders had been looking for was not mentioned – whether or not Help to Buy would be extended before its current cut-off of March 2021.

It was referred to, however, not in the speech but in the depths of the accompanying ‘Red Book’ documentation (paragraph 4.61, to be precise). And there was something of a sting in the tail. Help to Buy will be extended, by two years, and then it will not end – probably not as long as housebuilders were looking for, but in line with recent newspaper reports. And it will be restricted to first-time buyers only, as almost universally expected.

London houses

The future of Help to Buy and thus the housing market remains unclear after the Budget

Source: Shutterstock/AmbientShoot

But the other caveat was not as expected: there had been strong speculation that the ceiling on household incomes of buyers eligible for the scheme would be restricted to some way below £100,000. This would have been fairly cosmetic, since only 4% of all buyers have been above this level.

In the event, it was prices of houses sold under the incentive from 2021 to 2023 that were capped. Under London Help to Buy, which has driven most of the new-build activity outside the centre, the threshold will stay at £600k. But there will be a different maximum price for each of the English regions, ranging from £186.1k in the North East to £437.6k in the South East.

Considering Help to Buy had generated around half of private unit volumes for several of the major builders, this may dent their longer-term margin trajectory when selling houses. More likely it will be reflected on price they will pay for land now, for development in 2021 and beyond. One housebuilder had told me prior to the Budget that the industry had to be weaned of the ‘medicine’ of Help to Buy. This suggests the cold turkey might start earlier than anticipated. Some treat.

Alastair Stewart is an equities analyst and consultant