Let's Get Real About The Budget

The property industry’s reaction to the Budget has been more than a little naïve.

Firstly there has been a feeling of “well, it could have been a good deal worse”.

Perhaps that is true, but only because the property industry swallowed the spin of recent weeks when the Coalition played the old-style political card of exaggerating the ailment and the medicine. Almost inevitably, the actual announcements proved rather less terrible than the predictions – hence the statements “it could have been worse.”

A lesson for the property industry here is “get real”, as David Cameron said recently. The industry should surely be as sceptical and independent-minded about the Coalition as it was proud to be about the last Labour government.

Secondly, we have been far too preoccupied with the specifics of Capital Gains Tax.

Again, the gloomy Coalition-fuelled speculation of recent works was much worse than the 28% top-rated level that has actually been introduced.

But by allowing almost the entire property ‘debate’ to focus on this tax (which affects, according to economists, just 0.5% of the population in any one year) the industry risks missing the bigger point – that the Budget was not, as many suggest, benign to the housing market but was potentially very damaging.

Inevitably consumer confidence amongst many will be dented: literally hundreds of thousands of households will either have someone losing their job in the 25% government department cutbacks over the next four years, or they will be sufficiently worried about the prospect to become more timid in their spending.

Either way, that means these households will be much less likely to move house.

Likewise all those living in the regions listed by George Osbourne as having too large a public sector – chiefly the north of England and the Celtic nations – are likely to be less confident, too.

Many of their populations may work in the private sector but they will know that their local economies will be significantly muted until they are restructured in a few years time.

Now don’t get me wrong.

We all knew the Budget would come up with this kind of medicine, and there seems a surprisingly wise consensus that deep cuts are necessary. I am not dissenting here.

It is also true that in the long term, the supply of homes will remain well behind the demand - so the story will have a happy ending for prices, in the long term.

But what I am saying is that our industry should be more sophisticated and holistic in its response to this Budget and this Coalition. Of course the CGT rise could have been worse, but the ‘good’ result about that one issue does not make this a Budget that is good for the whole housing industry.

It is not; and there may well be a double dip in short term prices and demand as a result.

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