Yesterday marked the first – and last – Autumn Statement from the newly appointed chancellor, with Philip Hammond labelling the UK’s housing shortage as one of his main targets for the rest of this Parliament.
Following a sustained attack on the buy-to-let market over the last few years, the first spending announcement post-Brexit gave property investors welcome respite from further taxation or the removal of any incentives.
Instead, Mr Hammond focused on tackling the housing crisis through the creation of more property, rather than dissuading the buy-to-let market from investing further in UK property.
With a range of sweeping investment projects and a few surprise challenges to the market, the chancellor’s first fiscal address put housing front and centre.
The headline grabbing property news from Mr Hammond’s address was the strike against letting agents, with the chancellor announcing that the government would be implementing a full ban on fees for tenants.
The chancellor expressed his belief that the fees were ‘wrong’ and would be affecting those that the chancellor was aiming to defend in his announcement - this year’s buzzword group, the ‘Jams’, or the families ‘Just About Managing’.
Whilst the chancellor’s efforts appear to be a valiant attempt to help out the ‘Jams’, even his own cabinet colleague, Gavin Barwell, the Housing Minister, has highlighted a potentially fatal flaw in his plan.
Mr Hammond made it clear in his statement that it is landlords who appoint agents, therefore it should be landlords who should pay their fees.
But here’s where the problem lies.
Landlords will simply instruct their letting agents to add the fees to tenants’ rents, meaning that tenants will still be financially accountable.
Just last month, the Housing Minister was asked about a possible ban on letting fees during a Q&A on Twitter, but Mr Barwell admitted, ‘Landlords would pass costs to tenants via rent. We’re looking at other ways to cut upfront costs and raise standards.’
In yesterday’s address however, these alternatives failed to materialise.
For now, it seems it will be business as usual, with tenants still footing the bill.
Whilst tenants look to be left still fighting against letting agent fees in the years to come, the chancellor had some good news for those stuck in the rental cycle due to the UK’s continuing undersupply of housing.
As was previewed by Mr Hammond and Communities Minister, Sajid Javid, at October’s Conservative Party conference, the Tory pledge to boost the UK’s construction industry came to pass in yesterday’s address.
The chancellor confirmed that the government would indeed be pledging £2.3 billion to a new Housing Infrastructure fund, designed specifically to be allocated to local government in the areas where housing is needed most – with the aim of building 100,000 new homes by the end of this Parliament.
Additionally, a further £1.4bn was assigned to deliver 40,000 new affordable housing starts by 2020/21 and the unlocking of public land for development is planned to be made easier, with the release of £1.7bn to partnerships with private sector developers.
Housebuilding has been at the top of the Conservative government’s agenda since David Cameron’s election as Prime Minister in 2010. Yet, the demand for properties in the UK still far outstrips the supply, in spite of multiple government schemes.
Earlier this week, we highlighted the latest research from global estate agency, Savills, which revealed that the demand for property is in fact much higher than the government estimates.
Whilst the initiatives and funding announced in yesterday’s statement will help to counterbalance a portion of that short fall, the fact remains that the UK’s housing market will remain deeply undersupplied.
For property investors, this makes for great reading, as the demand for rental properties is likely to remain high as first time buyers continue to face the challenges of taking the first step onto the housing ladder.
With research from the Council of Mortgage Lenders also discovering that the number of people looking to own property now stands at its lowest level for over a decade, the need for private rental sector looks set to remain a structural necessity for the UK property market.
The three pillars of the chancellor’s Autumn Statement were housing, infrastructure and productivity, with all three firmly entwined when it came to addressing the economic gap between the South East and the rest of the UK.
An ongoing concern of his predecessor, George Osborne, Philip Hammond maintained the government’s approach to building greater productivity in the UK’s regions, by investing in the infrastructure of the Northern Powerhouse, and the newly dubbed Midlands Engine.
Emphasising the gap in productivity between London and the rest of the UK’s major cities, Mr Hammond said that balancing national infrastructure and economic importance across the UK was a top priority.
The chancellor announced that an additional £1.8 billion from the Local Growth Fund would be set aside for England’s regions – designed specifically to promote growth in infrastructure and providing city regions such as Manchester and Birmingham with greater investment.
As the London property market continues to wrestle with the impact of Brexit, the regions are taking centre stage, with the latest LSL/Acadata index indicating that almost every region in the UK is currently outperforming the capital.
With continued investment from the government and the private sector in these regions, the UK property market is now more open than ever before, with more property investors looking beyond London and seeing the potential throughout the rest of the UK.
Whilst yesterday’s announcement avoided any further taxation penalties for the buy-to-let and property investment markets – the phrase ‘Stamp Duty’ going mercifully unsaid – it also seems to be a continuation of the status quo.
As the government continues to tackle the ongoing challenge of the housing shortage, the commitment of further funding and the likely ineffectual ban on lettings fees seems unlikely to have too much of an impact on the market – and for property investors.
The real challenge facing the UK property market remains ahead of us, as Theresa May, Philip Hammond and the rest of the cabinet attempt to negotiate the best possible exit from the European Union.
With the Autumn Statement, the chancellor has made his mark, however slight, on housing. All that remains to be seen is just how far he can drive productivity in a post-Brexit market.