By Noel Meredith – Executive Director – United Trust Bank
Just before the General Election we asked brokers ‘which of the political parties policies would be most beneficial for the UK property market?’ Nearly three quarters of the respondents chose the Conservative party. By that point all of the main parties had promised measures which would encourage the building of more new homes and the Conservatives went a step further by promising to extend the ‘right to buy’ to housing association homes as well as council homes. Just how feasible that might be is still to be established but it certainly positioned the ‘Tories as the party of home ownership’ in the final throes of their election campaign.
With Mr Cameron’s tenancy at 10 Downing Street secured for another five years, the prospect of a ‘mansion tax’ being imposed on high value properties disappeared. Uncertainty surrounding the imposition of another punitive tax on property had, I believe, played a part in dampening the market for homes above the £2m level during the first part of the year. According to research carried out by GetAgent, the number of £2m+ homes listed on the major property websites doubled in the two weeks since the election. Although this may show that sellers were biding their time, it’s sales figures rather than listings which will show whether it was just the prospect of a ‘mansion tax’ that caused the upper end of the market to slow down.
‘Help to Buy’ and the changes made to permitted development rights for the conversion of redundant office space to residential use were two welcome initiatives of the last Government. United Trust Bank has funded a number of projects which have seen developers transform tired and neglected office buildings into attractive apartments in prime town and city centre locations. However, these opportunities are looking less attractive to developers as time goes on. Under the current rules, developers must have completed their conversions and have them occupied by the 30th May 2016 or lose the consent. With less than a year in which to acquire, convert and sell these developments, it would be a bold move to start a large project now. We would certainly welcome an extension to the rights beyond the current deadline but I suspect that is now unlikely to happen.
Although no one can predict what may happen over the next five years, the UK residential property market does appear to be in reasonably good health overall and the industry can look to the next 5 years with some confidence. Mr Cameron is keen to help those who want to own a home to own one whilst through MMR the Bank of England is ensuring this is not achieved at the expense of a debt fueled boom. However, we should also be mindful that in places where undersupply has pushed prices up to unsustainable highs, there’s the possibility of localised price corrections as affordability tests on mortgages will provide an effective brake when prices get carried away. Developers must therefore keep a close eye on costs; for land, for labour and materials.
Home builders have been challenged with delivering over 1 million new homes over the next five years and SME developers have a significant part to play in hitting that target. For those with the skills and desire to meet the task this presents an amazing opportunity. We’re ready to support builders willing to take it on.