It was a lacklustre budget for landlords this time around. Nothing was done to reverse low confidence and transaction levels in the resale market. Meanwhile, it was interesting that the anticipated measures to ease sales of rental properties to long term tenants weren’t announced after all.
The chancellor recognised our country’s increasing problem of short housing supply, pledging billions more to aid construction. This week, Rightmove’s rental tracker identified that rents are rising rapidly due to a supply-side squeeze, caused primarily by prior changes to the buy-to-let tax regime which is deterring new and diminishing existing investment in the private rented sector – with 9% fewer properties marketed for rent in Q3 2018 vs 2017.
Further research announced by JLL today forecasts that the average price of a new-build home in London zones 1 and 2 will surge by 17.6 per cent between Brexit and 2023. The causes are a housing supply crisis (only 20,000 homes are being built in London per year compared to the Mayor's target of 66,000), and rapidly increasing tenant demand.
That past decision by the government, to phase out mortgage interest tax relief and introduce a 3% stamp duty surcharge for additional properties, continues to have a detrimental impact on households up and down the country, and yet the chancellor opted to ignore the issue – despite evidence that the tax clampdown on landlords is directly resulting in rent increases and even repossessions for tenants across the UK. It’s especially problematic for renters in London, who on average fork out 49% of their salaries on rent.
With tenant demand increasing rapidly, and by as much as 20% in the next 3 years, whilst investor confidence and lettings property supply drops, we still need pro-growth taxation measures to ensure that there is an adequate supply of housing for London’s citizens.
It's not all doom and gloom, though. This is the final budget before we find out if Brexit is deal or no deal. It’s encouraging that public finances have performed so well, and that we’re coming out of austerity, with strong foundations at the heart of the world’s fifth-largest economy as our country’s independence materialises.
It’s critical that the government recognises the needs of the property industry going forward, but at Harrisons our experts have every confidence that as the economy begins to flourish and political certainty is restored, London property will continue to be a world-class asset and one of the best, safest and highest return investments over the medium to long term.