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In the Conservative Party manifesto for the election gone by, a key component was the promise to raise the Inheritance Tax threshold from its current £325,000 to £1 million. This was pledged to ensure that ‘only millionaires pay Inheritance Tax’. The current rules were badged as a ‘Death Tax’ by Shadow Treasury spokesmen,

So with George Osborne’s emergency budget speech being finalised ready for tomorrow’s tax and slash fest, is the IHT bar to be raised as promised?

It seems not. As part of May’s coalition deal David Cameron and his deal maker colleagues had to ditch the plan at the behest of the Lib Dems and so it seems doubtful that there will be anything much in tomorrow’s statement that will assist the housing market or home owners.

Grant funding for social housing has been cut back by £250 million or so.

Capital Gains Tax may be imposed at a higher, equal rate to income tax on asset disposals such as second homes and buy to let investments.

And VAT will probably rise, so making mainstream estate agency fees, for instance, even more unpalatable.

Oh well. Here’s to March 2011… (although the industry remains ever grateful for the demise of HIPs).

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Rightmove, the property portal, have today published their latest HPI overview of the market as they see it based upon their members’ asking prices in June.

Here is the release in full:

New sellers’ asking prices give an early indicator of the mood and future direction of the housing market. While sellers have increased their price aspirations for six months in a row, the pace is now slackening with a rise of just 0.3% this month, compared to 2.6% and 0.7% in April and May. The new government’s initiatives, including the suspension of Home Information Packs (HIPs), reductions in public spending and rumoured increases in Capital Gains Tax (CGT), are having an immediate effect on the housing market. We are now seeing more competition among sellers and a slowdown in the number of buyers as the market begins to turn.

Miles Shipside, commercial director of Rightmove, comments: “They say that troubles come in threes. The continuing mortgage famine has now been joined by a surge in sellers following the abolition of HIPs and investor reticence driven by rumours of CGT increases. Together, these factors are likely to put an end to this year’s recovery in house prices. It is an unfortunate concatenation of events that disrupts what was sort of passing as normal service, where investor appetite provided an uneasy balance to the first-time-buyer-starved market. A surge of HIP-free properties has come to the market, and mortgage-reliant buyers and wary investors are failing to match the increased supply. That spells tougher times for sellers and tenants, with more properties for sale and fewer finding their way into landlords’ hands”.

Having seen average asking prices rise for ten out of the last 14 months, and a 7.4% increase in the first six months of 2010, we forecast that new seller prices will fall during the second half of 2010 to give an overall price standstill for the year. The suspension of HIPs is one of the factors that will lead to downward price pressure, as it has removed a barrier to entry and increased the supply of properties to the market. The uncertainty and difficulty caused by the recession and the barrier to selling caused by the cost of a HIP, had helped to maintain a degree of market equilibrium by keeping the number of sellers in the same ballpark as the muted buyer numbers. This month Rightmove has recorded a 22% increase in the weekly run-rate of new sellers coming to market, up from 27,235 in May to 33,149. New listings are now up 56% nationally compared to June 2009, with London seeing the most dramatic rise in fresh stock at 88%. We believe this surge will tail off to a degree, but higher seller numbers and increased competition are new factors that those who are serious about selling will have to consider when setting their prices.

Shipside adds: “There is a bit of a post-HIP party atmosphere, with estate agents glad to restock their shelves and new sellers willing to give moving a go with fewer cost commitments. Estate agents will get more selective about what price they are willing to market at, and the commitment of sellers to doing what it takes to achieve a sale. Serious sellers in all but the most popular hotspots are going to have to reduce their asking prices unless buyer demand recovers after the World Cup. That’s good news for mortgage-challenged first-time buyers, though should affordability swing enough to bring them back to the market in normal volumes, one has to question whether the wholesale funds would be available to meet the increased mortgage demand. More agents and developers may seek to line up exclusive finance deals to secure their own future pipelines, similar to the 90% mortgage deals struck between Bovis and Barclays”.

This month sees average unsold stock per estate agency branch jumping from 71 to 74, the fourth monthly rise in succession. It is usual to see stock increase in the first part of the year as new sellers take advantage of the spring window, but it then normally starts to decrease in May as it is matched to buyers’ needs. Stock levels are failing to turn downwards, and are now the highest since October 2008. Estate agents report that many investor buyers have disappeared from the market. With cash-rich investors sitting on their hands and general buyer activity still hindered by restricted mortgage funding, the market is being further stymied as the speculated measures to reduce government borrowing move closer to reality. The emergency Budget is likely to heighten buyer nervousness around job security and spending power, while rumoured CGT increases could also permanently dampen the enthusiasm of the all-important investor market. Lettings agents already report a chronic shortage of new landlords, which will feed through into higher rents for tenants.

Shipside says: “Landlords need the right tax and funding environment to actively grow their portfolios and meet rising demand from tenants, who at present have few other alternatives to satisfy their housing needs. More investment in rented property needs to be encouraged to get cash out of investors’ pockets, and they require more certainty of a long-term favourable environment for both rental and capital appreciation”.

Any landlords looking for a speedy and profitable sale in order to avoid CGT changes should be wary of increased competition in the price band below £150,000, the price bracket favoured by buy-to-letters. The dearth of mortgage finance is still impacting first-time buyer activity so achieving a quicker sale, to avoid or minimise any CGT changes, could come at a price. Another factor of frustration for the professional investor and owner-occupier alike is that the effectiveness of property investment as a hedge against inflation is also under pressure. With the RPI now at 5.1%, the year-on-year increase in asking prices of 5.0% represents a decrease of 0.1% in real terms.

Shipside comments: “We forecast the annual rate of increase in asking prices to be at zero by the year end, and RPI remains stubbornly high. Property is a traditional hedge against inflation, but as so often in this downturn, the rulebook appears to have been turned on its head.”

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Since taking office, there’s one element of the coalition Government that has been none too shabby in getting to work on reforming things particularly in cutting bureaucracy and pointless governance ‘initiatives’ introduced by those reddest of red tape merchants, the prior Labour administration.

And these swiftest of changes hail from the department that most affects housing and the property market. 

Eric Pickles MP, as Secretary of State for Communities and Local Government is the reformer in question. As one of the architects of the Conservative election campaign in his prior role as Party Chairman, its slogan being ‘Vote for Change’, he did indeed promise it and is not being slow in introducing it.

Within days of the ink drying on the Cameron Clegg partnership agreement, Pickles and his cohort Grant Shapps had suspended Home Information Packs with the intention of binning them altogether.

Days later he hit cash absorbing quangos and ‘millionaire’ housing association chief executives. He is taking a good look at entities such as the Thames Gateway Development Corporations too which seem to me to be money haemorrhaging giants that fumble from one unfulfilled project to the next, achieving little in return for the millions that tax payers have fed them.

Not resting on his substantial first fortnight’s efforts, Pickles then swiftly took on regional housing targets. He scrapped them in order to ensure that our green belt be better protected from sweeping, one size fits all diktats as set previously by regional assemblies.

In amongst pledges on addressing illegal traveller incursions, returning power to councils, getting rid of labour’s plans for bin taxes and so on, Pickles has also just announced that he is passing measures to cut up the rules that allow garden grabbing. This is the practice of ‘in fill’ so favoured by developers in tight urban areas in particular and which results in massive over concentration of housing where it was not designed to be.

So that was month one in office.

What do future months hold for Pickles and his common sense reforms we wonder?

Well, we hope the revamping of the way that affordable housing is delivered so that it becomes efficient and somewhere near sufficent at last? Altering the slow, unaccountable and ineffective process that exists now. See here.

The introduction of the Conservative’s ’Open Source’ Planning paper, a community based approach to development control that puts decisions further into the hands of local people and elected councillors allowing specific areas to decide what they want and what they don’t want, as opposed to Whitehall telling them so.

Fingers crossed too for a legislative steer to the conveyancing process to prevent mischievous buyers and sellers pulling out of transactions on a whim? Improving the existing slow, stressful and uncertain method that hails from the middle ages. NO HIP REQUIRED.

Maybe a system of some form of light touch licensing or regulation for estate agents to ensure that they all actually know what they are doing and so that the consumer is properly protected from the ignorant and the unscrupulous?

Stamp duty reform (with the assistance of his Treasury colleagues) to ensure that fairness prevails rather than the current method of the various thresholds triggering tax at the higher rate on the entire purchase price. It’s only justifiable to charge the higher levy, if there should be one, over the higher threshold. Not on the whole lot. Should be just like income tax.

On initial form we have no doubt that Eric Pickles and his team will continue to make short work of doing what needs to be done in order to benefit the country’s housing issues, the property market and, consequently, the estate agency industry too. Together with a balance that will ensure that the aesthetic of our towns, cities and countryside be preserved.

We’ll be observing with interest, if we can keep up…

Housing Minister Grant Shapps MP has confirmed that there will be no replacement to HIPs. Good.

However he also says today that there will be no review of the conveyancing process and thus no legislative assistance to ensure that buying and selling a home becomes more certain and quicker. That’s not so good.

Housing Minister Grant Shapps MP and Secretary of State for Communities and Local Government Eric Pickles MP, jointly announced at 10am today that Home Information Packs are to be suspended as a necessity in the home selling process, with immediate effect and in anticipation of primary legislation to can them permanently.

In a press statement they said “This is a great example of how this new Government is getting straight down to work by cutting away pointless red-tape that is strangling the market. Rather than shelling out hundreds of pounds for nothing in return we’re stripping away bureaucracy and letting home owners sell their properties.

“But we’re also showing our commitment to a greener housing market by keeping Energy Performance Certificates and making them more relevant in helping buyers make informed decisions on the energy costs of their new home.”

HIPs are finally gone, and hopefully forgotten. EPCs are retained and will merely need to be commissioned, not received in order to enable the marketing of a residential property.

Well done Eric Pickles, Sec of State, and his Minister Grant Shapps for getting this done and, importantly, for fulfilling a promise. An entire industry (well, 90% of it) salutes you.

That is so unlike the other lot we had…