A new year, a new decade, a new government. At the start of 2020, there are reasons for optimism within the property sector – most notably, there is a feeling that some of the issues that have plagued the industry over recent years could be resolved.
In fact, just two weeks into the year and some positive news has already been revealed, with a report by the Royal Institution of Chartered Surveyors (RICS) showing that the number of agreed sales edged up for the first time since May, led by a marked increase in London. Price expectations also improved.
“The housing market is seeing some benefit from the greater clarity provided by the decisive election outcome,” said RICS Chief Economist Simon Rubinsohn.
However, the post-election bounce will not last; it must be built on to provide sustained growth and progress in both the property and construction sectors. After all, there are numerous pressing issues that these industries – and here I am encompassing renters, buyers, sellers, investors and developers – need to see addressed by the new government over the coming 12 months.
Addressing supply and demand
Much as we have done for several decades now, we begin a new year with the housing stock requiring urgent attention. The lack of affordable housing is making it increasingly difficult for people to get onto the property ladder, which means the imbalance between supply and demand must be addressed.
There are several elements to this. The first, naturally, is to ensure more new homes are built.
The Government has, unsurprisingly, been quick to promise just that. The Conservative Party has said it is committed to building 300,000 new homes every year by the mid-2020s. Moreover, it has set a target of adding one million new-builds to the country’s housing stock by the end of the current parliament (2025).
Will these targets be met? Data shows that successive governments have failed to meet their goals – indeed, FJP Investment commissioned a survey of more than 750 UK investors after the election result, with the majority (61%) answering no.
Nevertheless, when the Spring Budget rolls around on 11 March 2020, it is of vital importance that the Chancellor throws some financial weight behind his party’s promises; spending commitments must be made to ignite housebuilding across the UK, particularly in the regional hubs that are experiencing the highest levels of demand.
Support developers
But the Government setting bold targets for building more new homes is merely the start of the process – after all, MPs do not build the houses. As such, they must do more in 2020 to support developers, from large construction firms down to small local housebuilders.
This support can come in many forms. For one, as stated, the Government can contribute capital towards projects, ensuring the funding is there to kickstart developments. But it can also help by reviewing planning permission regulations.
Freeing up hitherto unavailable land or enabling developers to convert derelict sites are examples of potential reforms.
Furthermore, tax cuts for residential property developers or even findings ways to incentivise private sector investment into residential developments – through channels such as development finance – could also prove worthwhile.
Control the BTL market
The Government’s other approach to rebalancing supply and demand has been to dampen the latter. Specifically, controlling the buy-to-let (BTL) market to ensure that not too large a proportion of the housing stock is consumed by investors.
It is certainly something that we have seen from the Conservative Party over the last decade.
Since 2015, landlords have had to pay more tax and abide by more regulation, which has dampened appetite for this type of property investment. In fact, a recent survey of landlords found that 26% are planning to sell at least one property in 2020, while 82% said they are not planning on buying any more properties. Tax increases and red tape were the main reasons cited.
However, from my perspective, aggressively targeting BTL landlords will not solve the housing crisis; it will not give first-time buyers the helping hand they require, nor will it significantly boost the amount of affordable housing available across the country.
It will be interesting to see if the Government continues with this approach when the 2020 Spring Budget is delivered.
Reform stamp duty
Elsewhere, the property sector will also have a keen eye on potential stamp duty reforms in 2020. For one, the new government has also proposed a stamp duty surcharge of 3% for non-UK residents who are buying a UK property; it seems likely that this will be implemented or, at very least, confirmed in the coming year.
While this reform may not act as a huge deterrent – UK stamp duty rates would still rank below many other global property investment hotspots – it could still be popular with British homebuyers. The investors, meanwhile, may turn their attention to other methods of investing in the real estate sector, through avenues like development finance and debt investment.
Other stamp duty reforms have been touted, too. It might be removed for all properties up to £500,000; it could even be scrapped all together for first-time buyers.
More radical still, there have even been slightly more far-flung rumours that stamp duty could be dramatically changed. It could, for example, be made payable by the seller rather than the buyer.
Again, March’s Budget will be of particular importance.
Be creative
Ultimately, if I was asked what single thing I would like to see from the Government when it comes to the property sector in 2020 it would be this: be creative.
Small incremental changes in the ways previous governments have done will likely leave us in a largely similar position at the end of 2020 as we start it.
Prime Minister Boris Johnson, Chancellor Sajid Javid and Housing Secretary Robert Jenrick should look beyond minor regulatory reforms, tax revisions or loose spending commitments. If there is going to be a significant rise in the number of houses being built; if more people are to get on and move up the property ladder; and if developers are to be given the support they need to build amazing new projects, then bold ideas are required.
Once the Brexit deadline passes, I hope the Government can turn its attention to pressing domestic issues, with the property sector a prime example. It remains a bedrock of the UK economy as well as a hugely attractive market for both domestic and international buyers – neither of these things can be taken for granted but must instead be nurtured over the coming years.
Jamie Johnson is the CEO of FJP Investment