UK Budget 2013: Osborne Primes His Housing Howitzers
As predicted by many commentators, the Chancellor used his Budget 2013 to wield the only real weapon left at his disposal – the government’s ability to borrow at minimal interest rates. In an ideal world, George Osborne could simply give everyone large tax cuts so that people could spend more in shops, restaurants and pubs etc. However, he doesn’t have the fiscal headroom to do anything like this and, in any case, there would be no guarantee that people would go out and spend the money locally. They might choose instead to save half of it and use the other half to buy foreign built TVs, smartphones and cars etc.
It is no surprise therefore that he has decided to launch his heavy artillery on infrastructure and, more precisely, the housing sector.
Since 2006, the number of first time buyers in the UK housing market has plummeted by 40%. This has meant that existing home owners have found it extremely difficult to trade up and the whole housing market has almost ground to a halt.
By extending measures to help prospective buyers, especially first timers, the Chancellor is able to kill a whole flock of birds with one stone. Since a large chunk of the incentives are geared solely towards new properties, he has almost guaranteed a surge in new housing starts which will create thousands of new jobs and much more demand for building materials which are mainly sourced in the UK. This process will start almost immediately at the beginning of April.
This will be followed up next January by the new State Mortgage Guarantee Scheme which will help buyers with their deposits on all types of houses, both new and old. This is all designed to induce a substantial recovery in housing sales right across the board.
The net effect of a much busier housing market is that prices should start to recover and make owner occupiers feel better off and more confident about spending. This usually translates into a healthier market for big ticket items like furniture, household appliances and carpets.
Given all the constraints placed on him, Mr. Osborne has probably done the only thing left to him in his quest to kick-start the domestic economy in a meaningful way. The housing market is critical to consumer confidence and, ultimately, electoral success.
The sad thing is that the banks and building societies which were so quick to extend mortgages with normal deposits of 5% – 10% when the market was at its peak in 2006 are now demanding deposits of up to 25%. One would have thought that they might have done things the other way around i.e. insist on higher deposits when the market was at its peak and more vulnerable to price falls.
As it is, the banks will take several more years to get lending back to normal levels and, in the meantime, the government is stepping up to fill the shortfall. We must all hope that the Chancellor’s big guns can finally open up the road to sustained economic growth.
You can see online and on Twitter groups for more meaningful insight and in depth analysis of the 2013 Budget, check out the Baker Tilly website or follow #BakerTilly13
More Business articles from Business 2 Community:
- What St. Patrick’s Day Can Teach You About Building Your Brand
- Mobile Trends in 2013 and What They Mean for Marketing
- Measuring the Success of Your Online Advertising
- eBay vs Google Adwords: Who Really Failed?
- 20 Tips for eCommerce Web Design and Usability