Yesterday the Chancellor George Osborne delivered his Autumn Statement, and announced a surprising reform of stamp duty which may have knock on effects at both the lower and higher end of the housing market in the North West and London.

THE STATEMENT

The key points of the statement relating to the construction industry are outlined as below:

• Stamp Duty – The current slab rate which sees a massive jump in tax payable for houses worth £250,001 and above will be reformed to a more gradual rise, with tax increases incrementally increasing for each tax bracket. [1]
• Infrastructure – Road building and flood defences see a major boost in funding, with one of the biggest road building programmes set out in recent history.
• The North – Investment in the North to create a more balanced economy geographically has been set out as one of the Chancellor’s aims. Investment in trains, especially the HS3 project has been earmarked.
• Construction Industry Scheme – A raft of improvements to the Construction Industry Scheme will be put in place to reduce the administrative burden on contractors.

PERMUTATIONS FOR THE CONSTRUCTION INDUSTRY

Construction experts are encouraged by the news on stamp duty, calling it a stimulus in a somewhat frozen housing market. 98% of buyers outside of London will be better off under the scheme, with only houses worth £1million and above seeing increases in tax paid. The tax decreases at the lower and middle end of the housing market will free up more equity for house buyers to put towards things like deposits and renovations. George Osborne has said in the past that he wants home ownership to be achievable for all, and these latest cuts perhaps see a further move away from private rental schemes as the desired norm for housing tenure. Developers may want to take note as profitability on buy to rent schemes may see a downward trend as a result.

Other changes that will purportedly be made are promised with next summer’s election looming in the foreground, with large swathes of investment in the North, especially Manchester, promised. How feasible these changes will be should a change of Government be brought about remains to be seen, but a balancing of the economy geographically is certainly in George Osborne’s mind, and as a result London contractors and developers may want to look North.

Osborne’s news on stamp duty is welcome for most of the construction industry, but whether other changes can make a long lasting impact will be much more clearer after next summer.

[1] You will pay no tax on the first £125,000 paid. Then 2 per cent on the portion up to £250,000.Then 5 per cent up to £925,000.Then 10 per cent up to £1.5 million.Then 12 per cent on everything over that.