A pledged property building revolution - bigger than “any government since the 1970s” has announced - fuelled shares in the listed housebuilders as Chancellor George Osborne delivered his Autumn Statement.
Addressing Parliament, Mr Osborne managed to find nearly £7bn to deal with the chronic shortage of homes, including £2.3bn for 200,000 starter homes for first-time buyers with a 20 per cent discount on prices up to £450,000 in London and £250,000 elsewhere. Another 135,000 Help to Buy homes were also pledged as well as 10,000 homes which tenants can live in for five years at reduced rents while saving for a deposit. And the list went on to reach 400,000 new homes.
But the discount scheme was announced earlier this year along with plans to build 200,000 starter homes by 2020, although this differs from the 1m new homes specified in the latest housing and planning bill and the total mentioned in this Autumn Statement.
Franklin Templeton UK equity fund manager Colin Morton said the pledge to build 400,000 homes by the end of the decade was a “staggering ambition”, meaning housing construction would have to increase 50 per cent at a time the strategies of some major housebuilders is “not to increase” the 15,000 homes they are building annually at present.
Another issue is the planning system, which is being administered by stretched local authorities, which are under-resourced as they deal with central government funding cuts.
However, some relief on this might come with proposals to allow local authorities to keep the proceeds of asset sales and to retain business rates where there is an elected mayor.
Beyond this, the industry has been hit by the fact some 300,000 skilled workers left the building sector in the recession and attempts to replace them have only been marginally successful, and all builders have identified labour costs as a constraint on output.
Elsewhere, buy-to-let landlords also received a hit with a new stamp duty 3 per cent higher on buy-to-let properties and second homes from April 2016. This news immediately hit the share prices of buy-to-let lenders such as OneSavings Bank (OSB), Aldermore (ALD) and Paragon (PAG).
Old Mutual Wealth financial planning expert Rachael Griffin said the government expected to pocket £880m a year from this measure by 2020-21 making it "another major blow for buy-to-let investors" after the curb on mortgage interest tax relief.
"Many landlords are already concerned that the margins on buy to let investment are being squeezed and for some this may be the final nail in the coffin." she added.
Key announcements:
Pensions
There was “unprecedented support” for pensioners with the basic state pension rising £3.35 to £119.30. The new single tier pension will replace the basic state and additional state pensions from April 2016 and will be £155.65 a week. Elsewhere, there was little impact for direct investors with the Isa allowance for 2016/17 held flat at £15,240 and the Child Trust Fund and Junior Isa allowances held at £4,080.
Energy
Mr Osborne announced plans to double the Department for Energy and Climate Change's (DECC) innovation programme to £500m over the next five years, with the aim of strengthening the country's power supply security and reducing the cost of decarbonisation. The nuclear sector will also receive a boost, via a new nuclear research programme. In order to aid decommissioning work, the government will also spend £11bn on cleaning up sites such as Sellafield.
Local rates
The move to give local authorities the right to keep all the revenue from business rates they raise could impact the retail and hospitality sectors. It could be positive if rates are lowered, but with control of the purse strings local mayors could choose to tax businesses more.
Innovation Finance Isa
The government will legislate in autumn 2016 to allow certain debt securities such as bonds issued by companies and offered via a crowd funding platform to be held in the new Innovative Finance Isa. This launches on 6 April 2016 when it will be available for peer to peer loans issued by individuals and companies.
