After the promise of the Autumn Statement and the rhetoric of the Housing White Paper, is there any hope the Spring Statement will offer some real solutions?
Housebuilders aren’t overly optimistic that the Spring Statement will bring much sunshine into their lives. The light that was shined on housebuilding during the Autumn is likely to have waned for the last ever Spring Statement.
Nonetheless, hope springs eternal and the industry has spoken about the words they would like to hear the Chancellor utter on Wednesday, starting with ripping up a few taxes and supporting demand.
“Everyone knows we’re not building homes fast enough despite recent improvements,” said Jeremy Leaf, north London estate agent and a former RICS residential chairman. “But just as worrying is the fall in transactions over the past 12 months, which is having a detrimental on effect on the rest of the economy.”
Stamp duty has been painted as the villain of the piece, with many angry commentators demanding it be reformed. “We would welcome a reduction or suspension in stamp duty at the Spring Statement this month, as we were very disappointed it was not addressed last year,” said Jason Rishover, CEO of Heronslea Group. “Since the hikes were imposed back in December 2014 nationwide sales have dropped significantly. Land Registry figures last April showed sales volumes were down 72% in prime central London on the previous year. England was similar, sales in April 2014 were 71,000 compared to just 42,000 in April 2016.
“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.”
Institutional investors have also been punished by surcharges, damaging sectors which the government pledged to support. Parul Scampion, COO of London developer Fruition Properties, said, “Providing an exemption for institutional grade investors on the 3% surcharge on buy-to-let/second homes would also be welcomed, helping to drive the build-to-rent market, which the government continues to tout despite its punitive policy which is actually stopping the investment needed.”
The government also needs to stop its conflicting policies and messages – for example on the one hand it says it wants to encourage SME developers with the £3bn Home Building Fund, yet on the other it punishes them with unfair business rate rises.
“We would love to see a fundamental review on business rates, as some company’s costs will now be similar to or exceed corporation tax – up to 400% in some cases, a particular burden in London and South East where property prices have spiralled,” said Scampion. “This is going to discourage SME housebuilders from entering or indeed staying in the market – the exact opposite of what the Government is trying to achieve with its £3 billion Home Building Fund. Would you like us to get building or not?”
Meanwhile, some developers are hoping that the Spring Statement might correct some unpopular moves announced in the Housing White Paper. John Elliott, Managing Director of Millwood Designer Homes, said, “I am concerned about the previous announcement in the recent Housing White Paper to allow councils to issue completion notices demanding builders start building within two years rather than three.
“This is fraught with danger and will suppress housebuilding rather than ensure the government’s housebuilding targets are achieved. Once planning has been granted on a site, it can take 18 to 24 months before the planning conditions are satisfied, and to ask housebuilders to spend huge sums to secure planning over sometimes several years, for councils to then decide the development is not valid on the new timetable, is unacceptable.”
Daniel Hegarty, CEO and Founder of habito, has said that while the Spring Statement must ensure that new homes remain within the reach of the average buyer. “With the millions of pounds being poured into new developments across the country, it’s imperative to ensure those homes are accessible to the broadest cross-section of the population,” Hegarty said. “At habito, we’ve seen a rise in both Help-to-Buy and Shared Ownership schemes, signalling a greater need for these schemes at time when house prices are at their peak.
“We need to see Chancellor Hammond put his money where his mouth is and either extend or introduce new help-to-buy or Shared Ownership schemes,” said Hegarty. It is key to ensuring the long-term homebuilding strategy reaches first-time buyers and families who have been left out of the windfall created by London’s surging valuations.”
Leaf added, “In conclusion, there is no single solution to ‘fix the broken housing market’ but there is also no point in building new homes in places where first-time buyers can already get on the housing ladder just to attract positive headlines.
“More clarity on Community Infrastructure Levy payments and planning conditions should improve valuation/time expectations and planning delivery. It is also worth noting that the ten largest developers build 50 per cent of all new homes, while 20 produce 65 per cent of new homes so they need improved access to funding for SMEs.”