Perhaps as interesting in yesterday’s budget was as much what wasn’t said as well as those things which were covered. The impact of the budget on the housing market is likely to drive the two-tier market which has been created. With respect to the residential market there were three key announcements: an extension to the stamp duty holiday, new 95% mortgage guarantee program and a 31.5% increase to corporation tax.
The reality is these measures will pour additional fuel on an already white-hot market which has been completely in congruent with the broader UK economy. According to the Nationwide House Price Index, Average house prices in the UK have grown by 6.4% in direct contrast to GDP which has declined by 10% during the same period. However, who benefits from the growth will depend on their position in the market. But the reality is further supply constrained value growth will expand the gap between the winners and losers.

The Winners
Who were the winners from yesterdays changes?
First Time Buyers
First time buyers or those wanting to get on the housing ladder the extension to the stamp duty holiday, help to buy and the proposed 95% mortgage guarantee mean it is perhaps as easy as it ever has been for first time buyers to get on the housing ladder. The one major downside will be timing and the speed at which they can act. For those constrained by a lease or waiting to save their 5% deposit the longer they must wait the higher their costs to get on the ladder. A number of new 95% mortgages are now available to first time buyers as a result.

Offshore Investors
Offshore investors even with the additional 2% stamp duty surcharge, no changes to capital gains tax and the likely growth in house prices will leave offshore investors spotting the obvious opportunity! However, future capital value growth and changes to the way in which mortgage costs are taxed, mean they are far more likely to see themselves as short-term speculators who provide early access to capital to get larger high-density schemes off the ground and sell their positions taking the capital appreciation rather than hold for the long-term.
The Losers
Owner occupiers and those constrained by being taxed in the UK are likely to remain losers in the housing market.
Owner Occupiers
Owner occupiers those already on the housing ladder are not going to see a great deal of upside nor downside from the latest changes. There will be a short-term incentive created by the extension of the stamp duty holiday, however, given the time required to exchange a complete on a sale UK the incentive is only available to those who have already set the wheels in motion to relocate. But no doubt further house price inflation will be popular.
UK Buy to Let Landlords
UK buy to let investors are the big losers from the budget and earlier changes to the way in which mortgage interest is now treated. The incentive to buy property via a company is likely to be now far less attractive and there is far less incentive to own buy to let property in the UK for those who earn their principal income in the UK. This captive capital is likely to be looking for returns sooner or later. I suspect with the potential for additional taxes rises in the UK on the cards, it will not be long before this capital starts looking offshore.

Build to Rent Investors
The UK’s build yo rent industry is unlikely to welcome the 31.5% increase in corporation tax. The industry is unlikely to benefit from the ‘super- deduction’ and given they operate with relatively low levels of gearing the increase in corporation tax and growth in prices will mean they may find it difficult to make their numbers work. For the BtR industry the corporate tax increases are a double whammy – net profits will reduce for those owning large scale investment portfolios and It will be much more difficult to compete with build to sale when buying land for development.