The autumn 2017 budget contained few surprises when it came to the housing market.

Perhaps in an attempt to detract from a gloomy overall economic forecast, Philip Hammond's pledges for the housing market received considerable press exposure even before the official announcement in the House of Commons confirming that the Government will:

  • increase the number of new homes to be built annually from 217,000 last year to 300,000 by the middle of the next decade;
  • implement planning reforms to ensure that homebuilders do not delay acting on planning permissions already granted; and
  • cut stamp duty to 5% for first-time buyers on properties sold for between £300,000 and £500,000, with no stamp duty at all applying to those properties under £300,000.

As may have been the intention, these are undoubtedly headline-grabbing reforms. However, their impact depends both on how well they are implemented and on the wider economic situation. It is also possible that they may promise more than they are actually capable of delivering.

The independent Office for Budget Responsibility has already cast doubt on the likely effectiveness of Hammond's reforms.

In its view, they may prompt a rise in house prices and result in the purchase of no more than 3,500 extra homes per year.

Its predictions stem particularly from the fact that the cut in stamp duty, which is estimated as likely to affect around 80% of first-time buyers, primarily may benefit existing home owners.

Current estimates are that prices could rise by 0.3% as a consequence of relatively large numbers of buyers, all with increased spending power, competing with each other for a limited pool of housing stock.

Much of this rise is thought likely to happen in the forthcoming financial year. As a result, anyone hoping to capitalise on the stamp duty cut may see sense in moving quickly when it comes to a prospective property purchase.

Slightly offsetting this predicted rise in house prices is the assumption that some first-time buyers, with smaller than average budgets, may now be able to use funds that would have otherwise gone on stamp duty to increase their overall purchasing power.

However, they may find this cold comfort if they do end up paying appreciably more for a property than it was valued at a few months' earlier.

Consequently, the size of the deposits needed to obtain a mortgage and the earning power that is necessary to service that mortgage may continue to be the chief preoccupation of would-be first-time buyers.

The cut in the stamp duty threshold is likely to affect different areas of the country to varying degrees.

In London, for example, where only 5.3% of properties currently fall into the sub-£300,000 price bracket, fewer buyers can benefit than in cheaper areas of the country.

As well as perhaps not offering the lifeline that many of those struggling to get on the housing ladder are seeking, arguably the stamp duty changes also do little to help those already on it move upwards. This ongoing inability to step up the ladder inevitably also impacts those seeking to make their first property purchase.

A further problem, not really addressed by the new changes, concerns potential downsizers, at the pinnacle of the property ladder, who may also face hefty costs if they decide to sell up in favour of a smaller property.

Some 63% of UK housing stock is currently owned by those aged 55 and older. Whilst some of these individuals may not want to downsize, regardless of any incentives offered to persuade them to do so, others might be tempted, in the right circumstances.

In crowded areas, such as the south-east, where affordable, family-sized properties are often at a premium, finding new ways to release suitable properties onto the open market looks likely to be a continuing conundrum.

Eddison Wells Financial are able to advise on a wide range of financial products. Providing the highest quality service at the most affordable price is a prerequisite and a firm ethos. If you’re thinking of taking your first mortgage, call now on 0800 808 9981 - a member of their team will be willing to help, and provide advice based on your own circumstances – visit their website here: