As we discovered last week, many senior figures from the UK property industry are already thinking hard about what Chancellor Philip Hammond could, or should, do in his first Autumn Statement on Wednesday 23 November.
As our early respondents showed, of the many topics that might come up in the House of Commons speech, relating to our property sector and the shortage of new homes Britain is suffering from. This week, some of the topics discussed last time come up again, indicating their importance – in the eyes of some of the most experienced executives in British Housing – to addressing as soon as possible.
Stamp duty has again been the subject to get the most attention. Jason Rishover, chief executive of London and Hertfordshire developer Heronslea Group, says: “We would welcome a reduction or suspension in stamp duty at the Autumn Statement this month. Since the hikes were imposed back in December 2014, sales have dropped significantly, not only in London but throughout the UK. Land Registry figures in April showed sales volumes were down 72% in Kensington and Chelsea on the previous year. England was similar, sales in April 2014 were 71,000 compared to just 42,000 this April.
“The stamp duty hike has therefore not just impacted the prime areas which it was intended for, but the entire market. These low sales are having a harsh effect on tax revenues as fewer sales means less stamp duty is paid.
“Back in 1991, former Chancellor Norman Lamont suspended stamp duty to kick-start sales. Something needs to be done to get the market moving again across all prices brackets and all regions, especially with Brexit looming next year.”
In addition to his general review of the stamp duty scheme two years ago, George Osborne also introduced a new surcharge on stamp duty on buy-to-let and second homes, which came into effect in spring 2016. Many developers would like to see this punitive tax adapted or withdrawn altogether.
For example, Neil Simpson, sales and marketing director at Bewley Homes, says: “As a luxury property developer, Bewley Homes would like to see issues surrounding the stamp duty placed on second homes to be prioritised and clarified in the upcoming Autumn Statement.
“With recent political events and changes across the world, globalisation has never played such an important role in the UK property market – and we are delighted to have seen an increase in the diversity of people buying homes across our development portfolio in Berkshire, Hampshire, Oxfordshire and Surrey.
“With these global buyers in mind, stamp duty penalties must be reconsidered and reduced by the government, to account for the evolution of homeownership in accordance with today’s economic and political environment.”
His company’s thoughts are not just with the wealthy, though: “Bewley Homes has always been aware of the prohibitive impact stamp duty can have on first-time buyers hoping to step onto the property ladder. While we always work to assist in these situations, it would be a welcome change to see a reduction that allows developers in our position to incorporate these additional costs into the overall property price. This would help to ease the pressure on first-time buyers and the Bank of Mum and Dad, and open up the possibilities for ‘Generation Rent’.”
The recent US presidential election has joined the UK’s unexpected Brexit vote in the summer to draw attention to the influence of overseas buyers to the British market. Evdokia Pitsillidou, director of risk management at easyMarkets: “This year’s address is considered especially critical given the UK’s recent fallout from the European Union. The prospects of higher inflation and slower economic growth are expected to leave a £25bn hole in the public purse by the end of the current parliament. Just last week, the Bank of England forecast the biggest overshoot of its inflation target since being granted autonomy to set monetary policy in 1997. The BOE now expects inflation to reach its target of 2% by spring of next year before peaking at 2.8% a year after that. It is then expected to hold above 2.5% into 2019.
“The Bank is also bracing for weaker economic growth over the next two years as Brexit negotiations play out. As a result, the Bank said interest rates are likely to fall further before returning to normal. Making matters more difficult for the chancellor is a new report from the Institute for Fiscal Studies, which said Osborne’s planned surplus of £10.4bn for 2019-20 was on course to be a £4.9bn deficit. It bears mentioning that Osborne’s prognostication came before the Brexit vote, which has altered Britain’s reality in profound ways. The market upset that the US election result brought was quickly normalized but its early days yet to predict how this will continue to play out. While Trump is a fan of Brexit, he’s certainly not a fan of free-trade agreements and with UK exports of £30bn to the US, it’s clearly a very important market.”
The importance of the rental sector is also stimulating thoughts on how changes to buy-to-let and the tax relief offered to private landlords might affect a part of the property market which is currently a major assistance to those unable to afford to buy, or looking for the flexibility of rent over homeownership.
Michelle Niziol, managing director of IMS Property Solutions, says: “We need to see a reversal of the discrimination against build to rent and professional investor landlords. Recent years has seen the government make it harder and harder to be a private landlord, but the low rates on savings means that hard working people are opting to put their money in property as long term investments. Changes to the tax relief that landlords can claim on second mortgages is punishing them unnecessarily and it would be great to see that reviewed along with SDLT levies.
“The private rental market is only going to grow and where George Osborne tried his best to stifle it, Philip Hammond seems to have a more realistic understanding of its importance. New build properties in early phases or redevelopment sites are attractive to professional landlords, but only if they are not being punished for acquiring them. For the developers it also helps bring people on to a scheme early and start creating a community that makes homes more attractive to owner-occupiers too.”
David Jennings, chairman of Movers & Shakers, the UK’s largest property industry networking body, has put his own questions to a large number of key figures to understand their outlook on what changes are needed to bring the UK property market back up to speed.
He says: “A panel of city council leaders from London, Manchester, Birmingham and Edinburgh, along with a couple of large investors and developers, at our most recent London property breakfast, were asked what they wanted to see in the Autumn Statement. In order to help housebuilding in general, it was felt that they need decisions made on the infrastructure that the industry is asking for, especially because at the moment London is running out of viable, developable space. This, it was stressed, doesn’t just mean the big ticket transport projects, but power, sewage and water too.”
The underlying thought was somewhat contrary to what housebuilders themselves feel about the role of planning regulations in the current housebuilding crisis: “The panel was also unanimous in its desire to see the government stop tinkering with the planning system. It was acknowledged that whilst there are problems with planning locally, the system itself is not the problem and that actually the industry just needs certainty in order to get on with building. Where interference would be welcomed though is in the revision of the planning fees charged in order to help fund planning offices properly and as a result speed up the process.”
Tony Dowse, chairman of Environ Communities, would like to see less reliance on the country’s largest housebuilding companies and more on what smaller organisations could do to bring significant improvements to new homes numbers. “If the government really is keen to increase housing supply then it should encourage the smaller players, “he says. “The plight of small housebuilders was highlighted by Tony Pidgely CBE, chairman of Berkeley Group, at the recent [WhatHouse?] New Homes Debate. Our sector has previously made a big contribution to the overall housing supply figures, but the numbers are now radically depleted due to a shortage of equity and continuing difficulty in raising money at a reasonable rate and with sensible gearing.
Yes, equity can be raised but the price is enormous with the return to the small housebuilder drastically diminished. This scenario is made worse by the continuing delays in planning. The high cost of producing the various reports now required means that a planning refusal can be a major financial disaster for a small housebuilder.”