RICS Chief Economist Simon Rubinsohn’s view: “The good news is that housing is near the top of the governments agenda when it comes policymaking. Less welcome in my book as least is the overwhelming focus on ownership at the expense of renting, whether it is private or social/aff ordable. I am yet to be convinced that the former tenure is right for everyone and despite the panoply of subsidies in place to encourage it, the prospect of higher borrowing costs as 2016 progresses provides a timely warning as to the challenges first time buyers need to be mindful of. Whether the latest package of measures provides the basis for a material increase in supply remains to be seen. My best guess is that it will result in the delivery of a higher level of new housing units but not on such a scale as to fully address the affordability question.”
The two most unexpected features of the Autumn Statement were the Chancellors U-turn on controversial plans to slash tax-credits and the announcement that spending on policing would be protected. However, these announcements still gave the statement quite a generous tone. The slight easing in the pace of consolidation over the next couple of years will be partly off set by revenue from the new apprenticeship levy and by a new additional layer of stamp duty on buy-to-let and second home property purchases.
Some of the other headline grabbers from the Chancellors statement were policies aimed at improving access to homeownership. These included the Help to Buy (HTB) Shared Ownership scheme and the Help to Buy London scheme. OBR Revisions to UK Tax Revenue Forecast
The policies will aim to increase access for first-time buyers, with the government either taking a direct equity stake in the property or providing an equity loan, interest free for 5 years. While previous HTB equity loan schemes do look to have provided the impetus to house building in recent years, they have also added to price pressures by stimulating demand and we suspect the more generous terms available on this new London specific policy will be no different. With the shared ownership scheme available for use with both new and existing properties, it has the potential to add to price pressures with less direct influence on house building.
Another housing policy measure was the announcement of direct grants to home builders to provide 200k homes that will be offered to first time buyers at discounts of 20% off the market price. To what extent this adds to house building rather than crowding out existing development in an industry that is already struggling with capacity constraints can only be seen in time. Indeed, the Q3 RICS Construction Market Survey reported record high levels of skills shortages with an average of 53% of respondents citing labour shortages across all of the main trades and professions. While the housing policy measures should result in an increase in supply they are also likely to fuel further price growth and, to this effect, they are arguably only one part of the solution to the current crisis.