The anticipation surrounding the forthcoming Budget announcement has enveloped the property sector in a mix of speculation and hope. Chancellor Rachel Reeves is poised to confront a host of pressing challenges within the housing market, with stakeholders ranging from homeowners to landlords and renters eagerly awaiting potential measures that could either alleviate or exacerbate existing pressures. This article delves into the critical issues that property experts are eager for Reeves to address, notably the enhancement of housing supply and the affordability of homes.
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The chronic undersupply of homes continues to be a formidable challenge within the UK housing market. Labour’s ambitious commitment to construct 1.5 million new homes over the next five years has been met with both optimism and scepticism. Experts assert that achieving this target should be a paramount priority, given the current housing deficit. Ashley Webb, a UK economist at Capital Economics, underscores the hurdles in meeting the government’s annual target of 300,000 homes, highlighting the sluggish planning process as a key bottleneck. The recent near-record low in residential planning application approvals underscores the substantial obstacles the homebuilding industry faces. Furthermore, Webb stresses the urgent need for a significant expansion of the construction workforce, estimating a requirement for approximately 385,000 additional workers by 2026 to meet housing goals. This need is further intensified by government plans to curtail net inward migration, which could strain labour supply even more.
Jeremy Leaf, an estate agent and former RICS residential chairman, echoes these sentiments, emphasising the necessity of boosting the supply of affordable housing for both rental and purchase. Leaf argues that increasing housing transactions can create a multiplier effect on the economy, enhancing both job and social mobility. Meanwhile, reform in stamp duty is another area of pressing concern. The current exemption for first-time buyers on homes up to £425,000 is slated to decrease to £300,000 in 2025. Experts urge the government to reconsider this impending reduction, which could deter first-time buyers in an already challenging market. Amy Reynolds, head of sales at Richmond estate agency Antony Roberts, advocates for a stamp duty restructuring, particularly for higher-value properties. She contends that the current system dissuades both buyers and sellers and suggests tax relief for landlords to attract and retain private landlords. Reynolds also calls for business support for small estate agencies, which play a pivotal role in a vibrant property market.
The private rental sector is grappling with an acute supply crisis, with an average of 21 households vying for every available rental property, a demand that surpasses pre-pandemic levels. Without government intervention, experts warn that the situation could deteriorate further. Tina Paillet, President of the Royal Institution of Chartered Surveyors, stresses the importance of not discouraging responsible landlords from the market. While the Renters’ Rights Bill aims to enhance standards, it falls short of addressing the core issue of supply. The National Residential Landlords Association (NRLA) has proposed several measures to bolster the supply of rental homes, including abolishing the 3% stamp duty levy on homes purchased to rent, particularly when landlords refurbish them, and incentivising the conversion of vacant properties into rental accommodations. The NRLA also urges the government to bring back into use the over 250,000 long-term empty homes in England and improve energy efficiency in rented housing.
Additionally, Shelter experts advocate for a substantial increase in social housing. Polly Neate, CEO of Shelter, views the Budget as a pivotal opportunity for the government to demonstrate its commitment to delivering the largest increase in social housing in a generation. Neate points out that the current scarcity of affordable social homes is displacing families from their communities and into temporary accommodations. Richard Donnell, executive director at Zoopla, supports this view, advocating for grants to support the development of socially rented homes. He suggests that a multi-year rent settlement could encourage investment in affordable housing, alleviating pressure on the private rental sector.
As the Budget announcement looms, the property sector remains hopeful that Rachel Reeves will address these critical issues. By focusing on increasing housing supply and affordability, the government has the opportunity to take significant strides towards achieving a more balanced and sustainable housing market. The sector eagerly anticipates the unveiling of the Chancellor’s plans, ready to navigate the potential reforms and adapt to the evolving landscape.
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