What next, post budget?

The increase in capital gains tax was expected but much more modest than feared. With rumours flying around of an increase to 40 or even 50%, it looks as though the Chancellor bottled it in the face of opposition from backbench MPs and traditional Conservative voters.

With higher-rate taxpayers paying 28%, those who rushed to sell their second homes and buy-to-let properties ahead of the Emergency Budget showed great foresight.

However, while an increase in Capital Gain Tax [CGT] to 40% or 50% was not realised, the lack of taper relief is a serious mistake. Those who invest in property over the longer term, perhaps to supplement retirement income, will be unfairly penalised when they come to sell their assets.

 CGT was the main story, as the proposed increase was heavily trailed in advance. In reality the rise to 28% for high-rate tax payers is a non-issue for the housing market.

The new rate takes us back to a similar rate to where we were under the pre-2008 rules, when taper relief was able to reduce a 40% headline rate of CGT to 24%.

With higher-rate CGT at 28% the argument for property investment still looks strong, and capital gains still compare very favourably with income tax at 40%.

The other issue of note is that with strong GDP growth forecasts for 2011 and 2012 - the inference is that the Bank of England will be encouraged to maintain a very loose monetary policy for longer than recently expected; suggesting interest rates at current levels could be maintained for longer.

This would underpin house prices and also contribute to ongoing low supply in the market.

In a world of imperfect choices, steps that help the economy to recover and help to maintain mortgage rates at affordable levels for most people are the measures that will underpin a healthy housing market in the long term. But in the short term pain is likely, as the effect of tax rises on household finances dampens the already fragile recovery in house-buyers' confidence, housebuilding is affected, and support for housing costs across all tenures is curtailed.

In housing terms this may be the "age of aspiration" as the housing minister said recently, but against an austere backdrop there is a long way to go before the supply of housing, or the ability of would-be home-owners to achieve their aspiration, are likely to show any significant pickup.