Today’s Budget set out the road beyond the pandemic against an improving UK economic picture.
Rishi Sunak has tried to present a budget focussed on investment and optimism, Nicola Gooch, Planning Partner at Irwin Mitchell commented.
Many of the announcements had been widely trailed over the last few days.
Perhaps the most significant ‘new’ announcement was the £4.8bn uplift in general local authority funding over the next three years – described “the largest increase in core funding for over a decade”.
Many of the problems in the planning system at present are a direct result of under-resourced local authorities struggling to cope with the volume of applications they face.
As such, this additional funding is likely to be extremely welcome.
That said, planning is not the only local authority department struggling for cash.
Councils are also responsible for funding social care, education and a wide range of other local services.
As such, whether any of this money makes its way to local authority planning departments will have to be seen.
The new incentives for ‘green investment’ are also to be welcomed, however they sit uncomfortably next to announcements of major investment into our roads networks and a cut in air passenger duty for domestic flights.
As to the funds already announced: Regenerating brownfield land can be notoriously expensive, so the additional funds to support Councils’ remediation efforts is to be welcomed.
This latest tranche of funding for brownfield land, in addition to the £400 million Brownfield Housing Fund and the £75 million Brownfield Land Release Fund, indicates that the Government may be serious about the ‘brownfield first’ pledges that Johnson made in his conference speech earlier this month.
The £65 million of investment into the digital transformation of the planning system is also a welcome recognition that the current software relied on by council planning departments may no longer be fit for purpose.
Given that this announcement follows hot on the heels of DLUHC’s announcement that 13 Councils have been awarded a share of the £1 million PropTech Engagement Fund to pilot ‘innovative’ new digital consultation tools; it seems clear that the pledge to digitise and modernise the planning system may be one of the few proposals from last year’s Planning White Paper left standing.
The Budget was set out without introducing any significant speed bumps for the UK housing sector, which should continue its journey back to normality in the coming months, with the frenzy of the stamp duty holiday fading in the rear-view mirror.
After what is set to be a record year for UK property transactions, supply should gradually improve in the coming months as sellers capitalise on the market’s current strength, and incremental interest rate rises help to moderate the high demand that has persisted since the market reopened.
We expect house price growth to finish 2021 in the single digit range, as the property market returns to more seasonal patterns, said Chris Druce, Senior Research Analyst at Knight Frank.
The government’s confirmation of a £1.8bn brownfield fund will help alleviate some of the impact of the pandemic on new homes output.
As ever, the devil will be in the detail. There are questions marks over how quickly this can be rolled out and which areas it will target to help ease housing shortages, commented Anna Ward, Senior Research Analyst at Knight Frank.
Responding to the Autumn Budget and Spending Review, Isobel Thomson, safeagent Chief Executive, said:
This wasn’t a Budget that held much for the PRS.
While the increase in the National Living Wage and the Universal Credit Taper are welcome boosts for working tenants on low incomes, with inflation likely to hit 4% and the rising cost of living there are still challenges ahead for the most vulnerable.
We know that agents and landlords are doing all they can to help keep people in their homes, but we are not out of the woods yet, as highlighted by the announcement of more funding to tackle homelessness and rough sleeping.
We look forward to learning the detail around the Government’s announcement last week of £65m for local authorities across England to support low income tenants in rent arrears.
Giles Coghlan, Chief Analyst at HYCM said:
Without a doubt, today’s Budget has set the stage for next week’s Bank of England (BoE) meeting. While government spending and the setting out of longer-term fiscal rules have been the order of the day for Mr Sunak, for many traders, the focus very much remains on spiralling inflation.
The big question now is whether the Chancellor’s efforts to help ease the cost-of-living squeeze will be enough to keep inflation fears in check.
To this, the BoE’s Huw Pill has already offered some words of caution. Although he remains coy about how he will vote in the meeting, his current outlook suggests that the inflation print could top 5% in the coming months.
This only adds fuel to the fire for expectations of an interest rate rise this November.
Right now, positive market sentiment and the prospect of the BoE turning off the taps on quantitative easing are lifting sterling – particularly against the euro, as the European Central Bank remain months behind this timeline.
However, the ECB meet tomorrow and this could create a new EUR/GBP dynamic.
Traders and investors may have been sitting on their hands until now, but we can be certain that any hawkish shift from the BoE will prompt them to act.
However, this current hawkish move looks very stretched now and it would not be a great surprise to see a ‘buy the rumour, sell the fact response’ and some GBP weakness ahead.
Raoul Veevers, head of planning at Cluttons, said:
The confirmation of the £1.8bn fund to support the development of more sustainable brownfield land for 1m homes is welcomed, even if this only works out at just under £12k per property.
This will hopefully be achieved in conjunction with significant public transport funding to boost the accessibility of these locations, which will possibly address at least one of reasons why this land has not been developed to date.
There is of course some scepticism as to how house builders have not been able to unlock these sites before now, but digitisation will make it easier to identify this land and its potential across the UK.
Fundamentally we need these homes to be built in the right locations with the appropriate supporting infrastructure.
James Hyman, head of residential at Cluttons, comments:
It is disappointing that the Chancellor has not reached out further to help private landlords, many of whom have struggled through the pandemic, being hit by lower rents, longer void periods and the extension of notice periods to 6 months.
We need to support these landlords, who are doing so much to assist the government to solve the UK’s housing crisis right now, with no support or tax relief in return.
With a 3% surcharge to enter the market and the looming fear of increased capital gains tax on the horizon, what incentive is there to being a private landlord right now?
Jitendra Khagram, director of KSEYE, said:
Unlike many industries, the property sector has performed extremely well during the pandemic, with the stamp duty holiday doing much to galvanise the market over the past 18 months.
As such, it is understandable that the Chancellor chose not to interfere too heavily in the property market.
There were positives to be taken nonetheless, in what was an unashamedly optimistic speech.
Housebuilding and infrastructure investments were inevitably a key feature, while the reforms to business rates will support the commercial real estate market by encouraging green investments in offices and the business rates relief for the hospitality, retail and leisure sectors will help high street businesses and their landlords.
More generally, news that the economy is forecast to grow by 6.5%, almost double the forecast rate, should buoy confidence among both domestic and international property buyers, underlining that the UK has fared better-than-expected during the Covid crisis.
I think that by not tinkering with property taxation or CGT, the Chancellor has taken the right path, and the property sector will likely welcome this decision.
Paresh Raja, CEO of Market Financial Solutions, said:
Today’s Budget was full of the usual optimism and rhetoric, but light on substance for the property market.
But I dare say the property sector will not mind. In reality, no news is good news, particularly as there were many rumours that a CGT hike was in the offing.
The property market bucked the trend and thrived during the pandemic, so limited state-interference at this time makes sense, allowing the market time to reset after the stamp duty holiday.
Plus, the Government needs all of the tax receipts it can get to fuel its ‘levelling-up’ agenda, so reforms to stamp duty or inheritance tax, which will have impacted property owners, were never likely.
For many homeowners and property investors, all eyes should now turn to next week’s Bank of England meeting.
Inflation has been on the rise throughout 2021, and the BoE will be under pressure to increase interest rates to combat this trend – doing so will impact on the cost of borrowing for property buyers, so this meeting could in fact hold greater relevance than today’s speech.
Ryan Jones and Mike Hampton-Riddington, partners in business rates at Cluttons said:
As an industry we were expecting no significant measures to alleviate the burden of business rates, so the announcement in the Budget today is more welcome than expected although not as fundamental as hoped and certainly not in line with ‘a fairer simpler tax system’ that the Chancellor promised at the beginning of his speech.
Nevertheless, we are pleased to see commitment to increasing the frequency of revaluations to 3 years mooted in the fundamental review earlier this year.
However, we wait full conclusions to be published to assure us this is not a trojan horse to make the appeals system more difficult behind the smoke and mirrors, and we say this because confidence in the whole change process is at an all-time low.
We also welcome the introduction of the business improvement relief and cuts for green initiatives and the freezing in the UBR and the 50% relief discount for the retail and leisure sectors but, whilst welcomed, for many will not go far enough when the high street has such a crucial recovery period right now that so much more could have been done to leverage.
Jamie Johnson, CEO of FJP Investment, said:
While today’s Budget may seem light on the property front, if anything this is a testament to the market’s resilience and strong performance throughout the pandemic.
As the property market resets after the hectic stamp duty holiday period, limited state interference is likely to be well received by the industry.
Taking in the bigger picture, there are definitely some positives to be taken from today’s speech. After all, given other areas of the economy are in need of more urgent Government support, we are fully behind the levelling up agenda and the Chancellor’s £1.7bn funding commitment to address regional disparity.
Targeted action is needed to address the UK’s longstanding regional inequalities, which have only deepened in the face of the pandemic, and a greater investment in infrastructure and skills will be key to addressing the longstanding ‘North-South’ divide, accelerate growth and unlock the investment potential of key cities and urban areas across the UK.
Property markets across the North of England and Midlands, for example, will benefit from the money being ploughed into regional economies, job markets and productivity.
Hugh Gibbs, co-founder of SearchLand commented:
This country doesn’t have enough homes.
The UK’s affordability crisis has been building for decades and there is an urgent need to deliver more high-quality affordable housing, but the pace of construction is failing to meet demand.
As such, the Chancellor’s funding pledge to encourage brownfield residential redevelopment across over 100 areas is a positive step in the right direction, but there needs to be a concerted effort from the government to ensure the homes are fit for purpose and affordable for those in need.
Construction has a vital role to play in the post-pandemic recovery of our communities and can significantly contribute to the government’s levelling up agenda.
We have seen how successive governments have attempted to solve the ongoing crisis by projecting ambitious housing targets, but until the shortfalls of the planning process are addressed, the potential of the UK’s viable land will continue to be wasted to the detriment of individuals’ urgent housing needs.
While we welcome the Chancellor’s commitment to increase housebuilding, what’s needed now, more than ever, is a seismic shift in our outdated and ineffective planning system, which continues to be a threat to housebuilders’ ability to deliver new homes.
A £65 million funding pledge to help digitise the planning system might seem like a positive step, but given the scale and complexity of the task, as well as this Government’s track record with digitisation projects, is enough emphasis being placed on this issue given its immense importance?