LONDON (Alliance News) - UK Chancellor George Osborne on Wednesday committed the UK government to building 400,000 new affordable homes by the end of the decade, confirming earlier reports, though the good news for housebuilders was tempered by the announcement of a new levy on buy-to-let purchases.
Osborne said the UK will build 400,000 new homes over the course of the current parliament to 2020, all of which will be affordable. The housing budget will be doubled to over GBP2.0 billion per year, meaning the government will help to build these homes.
Of these homes, nearly half will be starter homes, which will be sold at a 20% discount to the market value to young first-time buyers. A further 135,000 will be part of the government's 'Help to Buy: Shared Ownership' scheme, which will remove any restrictions on shared ownership, including who can buy them, build them and who they can be sold on to.
The government also will launch a London Help to Buy scheme for buyers in the capital. This will allow Londoners with a 5% deposit to get an interest-free loan worth up to 40% of the value of a newly-built home.
The Right to Buy scheme for housing association tenants also will be extended.
Beyond this, the government will make further reforms to the planning system in the UK to make it easier to build houses quickly, and it will release public land suitable for 160,000 homes and re-designating unused commercial land for Starter Homes.
Osborne also said the government will extend loans to small builders, regenerate run-down estates and will invest more than GBP300.0 million to deliver the first garden city in the UK for nearly a century in Ebbsfleet.
Housebuilders were still trading higher after Osborne's statement with Taylor Wimpey PLC up 2.4%, Persimmon PLC up 2.5% and Barratt Developments PLC up 2.2%, though the gains were pared back by the plans announced to introduce a new 3.0% stamp duty levy on buy-to-let purchases in the UK and second home buyers.
That new levy bruised shares in mid-cap buy-to-let lenders Wednesday afternoon, with OneSavings Bank PLC down 7.9%, Aldermore Group PLC falling 4.7% and Paragon Group of Companies PLC down 4.1%.
Osborne said the money raised from the new tax would be put towards funding for those struggling to buy their first home. He said his plan "addresses the fact that more and more homes are being bought as buy-to-lets or second homes". The extra stamp duty will aim to raise almost GBP1.0 billion by 2021, Osborne said.
Concern about the implementation of the new stamp duty levy on buy-to-let purchases and second homes was raised by the Council of Mortgage Lenders. Paul Smee, director-general of the group, said the additional levy comes on top of forthcoming tax changes already announced for landlords.
"Government will need to keep a careful eye on the cumulative effects; with the private rented sector housing around a fifth of the population, we do need to avoid unintended consequences," said Smee.
The British Property Federation, the trade body for commercial and residential property companies, welcomed the plans for the 400,000 homes with open arms. "This could be a seminal moment for the government, and the start of a building programme that actually delivers," said Melanie Leech, the chief executive of the federation.
"By committing billions of pounds to building new homes, government is really putting its money where its mouth is, and has set itself some ambitious targets that it must not fall short of," she added.
Chris Beauchamp, a senior market analyst at IG, said 400,000 homes is a "good start" to addressing the housing shortage in the UK, but still well below the annual rate the UK needs. He also noted shares in housebuilders had pulled back from the high seen pre-statement earlier in the day.
Alison Platt, the chief executive of estate agency Countrywide PLC, said: "The announcement of the chancellor's housebuilding ambitions are a welcome step forward in the process of redressing the chronic housing shortage we face today. Expanding the starter homes programme to include shared ownership will see more options for struggling first time buyers."
"While pursuing home ownership is certainly part of the route to a healthier housing market, the government needs to recognise the tide of structural changes fuelling the growth of the private rented sector. The growing private rented sector needs support, with incentives for creating quality stock and effective regulation to encourage great landlords," she added.
Shares in Countrywide were up 1.1%.
By Samuel Agini; samagini@alliancenews.com; @samuelagini and Sam Unsted; samunsted@alliancenews.com; @SamUAtAlliance
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