The Conservatives will turn on Help to Buy if they win the general election, according to the party’s 2024 manifesto.
The relaunched scheme will “provide first-time buyers with an equity loan of up to 20 per cent towards the cost of a new home” with a five per cent deposit on “purchasable interest terms”.
The scheme will be “partly funded by donations from homebuilders”.
Help to Buy was originally launched in 2013 under chancellor George Osborne.
It offers a five-year interest-free loan of 20 percent of the property’s value if first-time buyers put down a five percent deposit.
The scheme, which only applies to new-build homes, was updated in 2016 to include London Help to Buy with a 40 per cent interest-free loan on properties up to £600,000.
Simon Gerrard, Managing Director of Martyn Gerrard Estate Agents, said the manifesto shows that the governing party has “no imagination” and “no ideas”.
“Reviving Help to Buy is a good idea – but ultimately it’s worthless if there’s no house to buy,” Gerrard said.
“Lowering the loan-to-value and buy-to-let thresholds in London from £450,000 to £400,000 this time is confusing because property prices have appreciated since the last scheme was launched. Offering a watered-down and formalized version of the previous policy will not solve the crisis we are experiencing.
Help to Buy has been accused of driving up property prices in the capital, as housebuilders set prices closer to the £600,000 threshold. This new build premium also exposes buyers to negative equity risk.
Duty stamps scrapped – for some
The Conservatives have also promised to help first-time buyers by permanently removing Stamp Duty for first homes under £425,000.
Currently first-time buyers pay zero stamp duty on homes up to £425,000 and five per cent on lots between £425,001 and £625,000, although this will end in 2025.
“It’s not a bad idea, it just doesn’t go far enough,” Gerrard said.
“The Stamp Duty system in the country is not fit for purpose by preventing transactions, congesting the market and discouraging parents from downsizing,” he said.
“If the Government changes stamp duty to encourage a reduction, then there will be more properties suitable for young families on the market, which is also badly needed. The tax needs to be completely overhauled, not tossed around the edges.
Prohibition of section 21 (again)
Section 21 is a so-called no-fault eviction where the tenant can serve two months without the landlord having to give a reason.
The bill stumbled when landlords argued that the ban would jeopardize property investment.
“We will deliver the necessary court reforms to scrap section 21 completely and strengthen other grounds for landlords to evict private tenants who behave anti-socially,” the Conservative Manifesto said.
Ben Beadle, chief executive of the National Residential Landlords Association (NRLA), says that is not enough.
“The reform of the rental market should have taken place in the last Parliament,” he said.
“As I have said, the balance between security for tenants and policies that maintain the confidence of responsible landlords is essential if we are to deliver the homes we need to rent.”
One of the new ideas for housing in the manifesto is a tax break for landlords who sell their homes to tenants.
“To further support landlords, we will introduce a two-year temporary Capital Gains Tax relief for landlords who sell to existing tenants,” reads the manifesto.
This can solve the problem of tenants losing their homes when landlords sell them – if tenants can afford the house after years of paying rent instead of saving a deposit.
Graham Boar, Partner at accountancy group UHY Hacker Young warned this could create a loophole that is “ripe for abuse”.
“There is a risk that the landlord who sells the property will make himself a tenant leading to the sale, avoiding Capital Gains Tax,” said Boar.
“A landlord can also sell the property ‘on credit’ to the tenant, who can then sell it at no gain and repay the debt to the landlord. Either way, HMRC will lose a huge amount of tax.
HMRC raised £1.7 million in Capital Gains Tax from the sale of one or more homes, most of which came from landlords who bought them.
“Renters who want to become homeowners need to be supported,” Beadle said.
“While incentivizing landlords to sell to existing tenants has the potential to help, it will not reverse the damage to the rental market caused by tax increases under the new Conservative government.”
There is no mention in the manifesto of changes to the tax regime for individuals not domiciled in the UK – aka non-doms. Overseas investors are reportedly waiting to see how the election goes before buying homes in London, causing prime property prices to stumble.
“Despite the Chancellor’s announcement on March 6 to abolish the British non-dom regime, the Conservative manifesto is completely silent on the subject, without further information on when the change can take place,” said Carol Katz, partner at Mishcon de Reya Private. tax group and wealth planning.
“The Labor manifesto may include more detail on the proposal, and we await its publication with interest.”
The full Labor manifesto is expected to be published this week.