Prime Minister Rachel Reeves last month proposed several measures that impact the UK’s housing and mortgage sector. However, along with many industry commentators, I have serious doubts about how many of these measures will be implemented, and I believe the fundamentals of how the market works continue to be misunderstood.
So, this makes it a missed opportunity for everyone involved in the industry, but more importantly those seeking to have their own home.
Let’s summarize some areas covered:
An important highlight is the government’s commitment to invest an additional £20 billion in affordable housing schemes. The funding aims to support the construction of up to 18,000 affordable and social housing units, which promotes a broad goal of building 1.5 million homes by 2030.
The Prime Minister stressed the reform of the National Planning Policy Framework (NPPF), reintroducing mandatory housing targets, and promoting development on the grey belt land. These changes are expected to result in an additional 170,000 homes being built during the forecast period, with real GDP in the UK likely to increase by 0.2% by 2029-30 to 2029-30 and over 0.4% by 2034-35.
The spring statement did not expand the stamp duty relief introduced in 2022. This return will therefore increase the financial burden on home buyers, with an estimated sign that about 74,000 buyers may pay an additional £142 million in stamp duty.
These changes are known to drive a surge in transactions as buyers shatter the completion of purchases by the deadline.
In addressing housing supply, the government has allocated £600 million to train up to 60,000 new construction workers through education and apprenticeship programs. The initiative aims to strengthen the workforce required to meet ambitious housing goals and ensure the development of the plan in time. But, honestly, where these new workers will come from is a mystery, and with the recent NI growth, I am very skeptical whether the construction industry wants to hire this number without the stronger commitment of the government to drive more new home sales.
As the boss said to me, don’t give me the problem, give me the solution, I think the above is easily criticized without giving some ideas about the solution or something different can be done.
Despite the many drawbacks of the above measures, the fact that the Labor government has higher housing on its agenda is beneficial to all of us who work in the housing, property and property financing sectors, as it shows that the sector is willing to succeed, while those in Westminster are keen to do so for the benefit of the voters.
In terms of areas that I think still need to be addressed, they fall into the following two categories:
Private rental department
The policy of having a clean and safe roof overhead is at risk, and we continue to pound on landlords and force more and more people out of the market, thus leaving behind shortages of rents that will drive prices for many of the lowest affordable people.
I won’t be clamoring about the Tenant’s Bill of Rights here, but in addition to the proposed minimum energy efficiency standard (MEE) changes, the minimum energy efficiency standard (MEE) currently being consulted, aiming to upgrade 5 million homes nationwide, uncertainty has caused some landlords to question their viability.
The key title of the consultation is the improvement of the current minimum energy efficiency standards, from the Energy Performance Certificate (EPC) level e to the EPC level C or equivalent.
The proposed date for domestic landlords to achieve this by 2030. The proposal will expect to boost 52% of private rental homes in England to the new EPC standard. How all this will be funded is a huge question, and who else will do the job – we only have five years?
Let’s just give UK landlords a break, they’re the foundation of the UK economy and help fill the shortage left by the continuous government’s failure to provide enough social housing – we need to support them, not slam them. Tenants will end up suffering, we need to change the narrative about landlords, our country needs them!
Buyer’s needs
In order for developers to have confidence in building more new homes, they need to be confident that it is not enough for buyers. But there are ongoing problems with life, stress on mortgage burdens, and no indication that replacing help buy or something like that can lead to uncertainty in demand. Furthermore, they cannot rely on overseas investors and/or real estate investors to buy real estate, and the government has once again stifled growth in these areas.
Whether we are doing something on stamp duty or buying a help version, we need to create demand, otherwise, if the developer can’t sell it, there is no motivation.
Beyond that, we recently saw the first change from Santander, a major lender, relaxing their mortgage affordability rules as the FCA and the government push banks to make their loans more flexible. As I mentioned before, affordability remains a problem for many and a barrier for many, so I welcome this, despite being cautious.
We have been there when lenders relax credit policies are not under enough control and despite everything and recently, we are still in a fairly benign economic period. As these things change, as these things are periodic, we need to make sure we don’t build problems for ourselves in the future.
We all know that a buoyant housing market will help support government ambitions to achieve economic growth, so the stamp duty measures taken along with the new renter rights bill will only help stop its growth plans.
I sincerely hope that the government is listening to the industry because I believe we are facing many of the issues we face in addressing home ownership and providing adequate rent. The UK property market is incredibly resilient, but it does require some smart policies, plus smart plans to implement them, and so far I’m not sure we all have.
Hiten Ganatra is Managing Director of Visieary Finance
