Chancellor of the Exchequer Rishi Sunak delivered the 2021 Autumn Budget on Wednesday, October 27th. What is the reaction from some of the UK property industry experts? Read below.
Kush Rawal, Director of Residential Investment at SO Resi (www.soresi.co.uk), comments:
“In addition to our existing new shared ownership schemes that are built to high energy efficiency standards and meet current building regulations, we are currently working on a number of schemes due for delivery over the next 12 months that put sustainability at their very core and go above and beyond what is expected – particularly within the affordable homes sector.
“However, it is important that we strike a balance and that the government ensures a move to green living remains affordable for both the consumer and housing provider, otherwise we risk creating a two-tier society where being sustainable is only for those who can afford it.”
On delivering affordable homes
“Fundamentally our priority is to ensure we continue to deliver a high volume of quality, affordable homes to those who need them most. Key to this is providing an affordable route to homeownership through shared ownership for the many people who cannot afford to buy on the open market. The new Affordable Homes Programme will bring about various changes to the delivery of shared ownership. Whilst we welcome the commitment from the government in supporting affordable homeownership, the Chancellor needs to address the wider issues in the housing market surrounding affordability and accessibility to homes.
“The property market is in crisis, with inflated house prices due to a combination of pent-up demand and the ripple effects of the stamp duty holiday. While there will inevitably come a tipping point and the market will eventually return to normal, for the many young people who dream of homeownership now, shared ownership is often the only realistic option. We need to ensure that shared ownership is protected, with adequate long-term funding from the government, otherwise we risk losing a generation of would-be homeowners.”
Lynda Clark, CEO of First Time Buyer Group, comments:
Impact the autumn budget on first-time buyers
“It is very encouraging to see the focus shift onto sustainable, green homes and this is what the housing industry now needs to ensure it plays its part. It is my hope that sustainable housing doesn’t have to mean unaffordable housing – and that first-time buyers aren’t hindered further when trying to step onto the property ladder. Certainly, more energy-efficient homes will save on the bills in the long run, but we need to ensure that first-time buyers can still enter the market to benefit from these savings.
“Previously, the stamp duty holiday injected new life into the housing market during a time of adversity which many buyers benefitted from. Initiatives such as the Levelling Up Fund are a step in the right direction; now more and more potential first-time buyers’ risk being edged out of the market as prices continue to increase and living costs creep up. With demand for affordable homes far outweighing supply we need to be realistic about how first-time buyers might afford a potentially more expensive home.”
“Many renters or young professionals with the goal of owning their own home continue to be at a disadvantage and as much as we can, we need to try and make sure this is a level playing field.”
Dean Markall, Sales & Marketing Director at Martin Grant Homes (www.martingranthomes.co.uk), comments:
“It’s shocking that despite predictions of an overwhelmingly green Budget, the Chancellor has barely given climate change a nod today. We anticipated today that we would see a lot of hot air coming from the government – but instead, there has been barely a breeze. But perhaps this encapsulates exactly why the delivery of an entirely greener Britain simply hasn’t been thought through.
“Whilst housebuilders will rightly so bear a lot of responsibility for helping the government to meet its green targets, the real problem on hand is that the vast majority of homes in the country are older and do not have the infrastructure to cope with drastic modern adaptions. It is right that the government enforces strict building regulations on new homes as they are built, but there needs to be greater consideration for how the country’s older housing stock can economically adapt.
“The new £5,000 heat pump grant is a step in the right direction, and we are in fact installing these within an upcoming development in Kirdford within the affordable housing units as we recognise the future benefits. However, the reason we have made the decision not to install these within all houses is quite simply a cost issue. Currently, the heat pumps are vastly more expensive and whilst they have been available for some years, in terms of their actual efficiency they still can’t compare with traditional gas boilers. We are at a tipping point and the scales haven’t quite shifted for consumers or businesses in favour of heat pumps.
“We saw a similar situation when the government encouraged uptake of woodchip biomass boilers. Ultimately this fell flat on its face as they were far more pollutant than a normal gas boiler when you consider factors such as mileage pollution to deliver the woodchips, and a substandard energy efficiency rating initially. And that’s without mentioning the staggering upfront cost! Most recently we have seen the Green Homes Scheme become a monumental failure as it wasn’t thought through properly.
“The sad reality is that as a small, family housebuilder, there is only so much we can do. Until sustainable options are made more widely available at a reasonable cost, it will be difficult for widespread change to happen. The government needs to ensure it offers the right support to those within the housing sector to ensure it meets its targets, and that smaller companies are not left behind.”
On the nearly £24billion committed to building new homes
“It is welcome news to the housebuilding industry that the Chancellor has committed a multi-year investment of nearly £24 billion to build new homes, with additional funding to unlock the potential of brownfield land. We know that there is an acute shortage of housing in the UK, and this commitment will allow housing providers to deliver quality new homes and work to a rebalance supply and demand.
“Whilst the Chancellor glossed over the climate crisis in today’s speech, his commitment to new homes is a firm nod to the value that new homes bring to the UK – not least due to their sustainability credentials. Let’s start with the simple fact that a new home is far more sustainable than its older counterparts. They are far better insulated than any other property and are therefore economic to run, and the new homes industry already has to meet high standards of sustainability. This will only continue as the government brings in further requirements for housebuilders to get up to scratch.
“The development on brownfield sites is in theory a positive boost, and will allow disused wasteland to be transformed into new communities. However, there are challenges that come with undertaking these vast redevelopment projects – not least the time and cost. For smaller housebuilders such as ourselves, this can be a deterrent for obvious reasons, and it may be that we see blue chip builders snapping up even further projects whilst smaller companies are left on the backfoot.”
Charlie Warner, Partner at National Buying Agents, Heaton & Partners (www.heatonpartners.com) comments:
“The Budget today has never been so important for the property market, after a year of huge house price inflation and desperately low supply. As the stamp duty holiday and Help to Buy tail off, plus an end to lockdown life, next year we should be in for a much steadier ride. Interest rate rises are likely but after historic lows, this is to be expected to curb wider economic inflation. The immediate knock-on effect will be on the mainstream mortgage market and affordability factors. The mid to upper market may not feel the effects of this for many months but the government must redress the needs of first-time buyers to ensure every cog in the market keeps turning and transactions remain steady.”
Jim Wood, Managing Director of Barratt London, comments:
Brownfield and planning support, plus going green:
“We welcome the support for housebuilding, increased investment in the planning system and the opening up of more sites on derelict and brownfield land. It is vital that we continue to increase housing supply to tackle the country’s shortage of homes, helping to create jobs and economic growth.
“The recent support for improving the energy efficiency and sustainability of new homes is welcomed – Barratt are helping to lead the way with the new Z House; our flagship zero carbon home delivering a carbon reduction of 125%. Barratt has a target to bring all of its new homes across the country, including London, to carbon zero by 2030.”
Simon Cox, Managing Director and Founder of independent land agency, Walter Cooper (waltercooper.co.uk), comments:
The Residential Property Development Tax (RPDT), due to take effect next April – in effect a cladding tax on ‘land banking’. Developers will be forced to pay £2 billion over ten years to help replace dangerous cladding, expected to raise £200 million a year:
- “Far from laughing all the way to the land bank, housebuilders are desperately trying to navigate the planning systems for faster, better results for all, but often faced with red tape around every corner, slowing down the entire process. This tax simply feeds in to the myth of the greedy developer who buys up all the land then sits on it for decades waiting for prices to increase.
- “While the Government forges a sledgehammer to crack a very small nut, the plan could actually have the opposite of the desired outcome. Either they will drive down the prices they are willing to pay for land (so landowners may think twice about selling) or they will pass the hit on to home purchasers – the already hard-pressed first-time buyers. Alternatively, investors may simply vote with their feet, putting their funds into a different industry with a less regressive tax regime. Some housing associations and landlords are already being forced to cut development plans due to fire safety spend. Building safety costs mean one in 10 affordable homes will not be built, yet another blow to meeting our new homes targets.
- “Housebuilders blame a broken planning system, planning officers blame councilors who are more interested in re-election than following the planning process, whilst everybody passes the buck back to the Government. I don’t think this tax will be the saving grace to fix the cladding crisis, instead demotivating developers from building the houses we need. There’s a reason why politicians and famous people find tax loopholes. And developers will find their own ways of doing this, for example faced with a substantial levy, they may well build smaller schemes.
- “What the cladding scandal has highlighted for me is that property management companies need to be better regulated. People who own flats have had the pants pulled down for years, charging hundreds of pounds for writing a letter. We’re seeing it today with eye-watering services charges topping tens of thousands of pounds for remediation works. It is appalling that management companies are still wondering if their building is safe for their residents – in any other scenario, this should render them in breach of contract and liable. I think the government should look at the profits of these management companies over the past few years and not only reform this sector, but add an additional tax to help fund the cladding crisis. There should be a national management company to oversee and regulate this industry, ensure contracts are competitive, and potentially create national sinking funds in preparation for large scale repairs.
End of Help to Buy
- “Closing the door on help to bonus will effect developers coffers undoubtedly, but couple this with tax hikes aimed at housebuilders and the very real fact that the flat market is, well, flat, means housebuilders – especially SMEs around the country – might have a tough year ahead and this may be the perfect storm to reduce the number of homes being built.
Going Green (£5k grants to replace gas boilers, retrofitting old homes, green mortgages)
- “The plan for clean heat is a great first step, but further direction is needed. Recent research (NHF) last week found that housing associations alone need at least £36billion to be able to carry our retrofitting plans so I am wondering how far £800m can really go. There are some 80million people in the country – let’s say half are adults and half of those own a home. That means that the £5,000 grant for homeowners to install heat pumps would need to be multiplied by 20 million to get every home running more efficiently, which equates to roughly £100 billion. Has the government just committed to £100 billion? I don’t think so.
- “The entire property industry feels the responsibility to build sustainability, and I’d hazard a guess that nine out of 10 buyers wants to buy green, however it’s all cost prohibited. Currently, green homes are too expensive to build, and too expensive to buy. As technology and manufacturing in the green sector improves over the next decade, the scales may start to shift, but as it stands the numbers don’t work. We need to get the manufacturing process significantly cheaper. Retro-fitting green boilers is so much harder than adding in tech solutions on new builds as part of the build. – Fix the problems of the future before trying to fix the past or we will continue to cause ourselves problems
- “I would have liked to have seen Rishi address the decarbonisation of the housing industry further in his Budget. We could create a minimum standard for all new build schemes in which 50% of homes on a site need to be self-sustaining through renewables. It won’t work on a small scale, but the big housebuilders who are creating developments of over 100 units can do this and set the bar for others to follow. And buyers will love this, avoiding massively fluctuating bills seen in the current gas shortage.
- “The green agenda is long term and needs a long term plan that neither penalises homeowners or discourages housebuilders from building the homes we still desperately need. Last time Rishi took a very short term view, and it seems like we’re in for more of the same: with another election not too far away, the question is, how to stop the ship from sinking?
What was not said – material issues, labour shortage
- “There are other immediate housing issues which Rishi failed to address. Material and labour shortages, primarily steel, continue to put the brakes on housebuilding. Housebuilding volumes fell in the three months to September, with larger drops expected in the last quarter. Even in 2019, housebuilding was still 20% below government targets. This compounds the issue of demand and supply, affecting house prices and larger economy. House-hunters have nowhere to go, and sales are falling.
Brownfield land and Planning reform (pledge to build 160,000 homes on brownfield sites, with £1.8bn being put forward to develop homes on derelict land & £300m of grant funding being handed to metro mayors and councils to assist with this.)
- “It’s great to see the Chancellor reconfirm his brownfield pledge in today’s announcements. The pledge for more homes is paved with good intentions. I am hopeful that some of these funds will also address the heavy remediation costs that these parcels of land often need. The environmental considerations and large-scale demolition, as well as need for subsequent infrastructure improvements, means the associated costs – all of which combined with general increasing build costs and material shortages – can work to make such a scheme unviable.
- “There is also the increasing competition for such sites if in the right locations with good road access to the industrial/logistics sector, meaning that there is no guarantee that residential can actually be delivered on such sites where landowners will inevitably be seeking the best values for their landholdings. It will be interesting to see how this competitive markets plays out over the next 12 months, and if Government policy and market forces are aligned.
- “The £300m being must be handed out with care – no one wants to see councils eat up the money on theory, proposals and consultants, none of which delivers bricks & mortar. I fear our broken planning system will simply absorb the money with little progress made. The truth is, our planning system is not commercial based so we will never get best value – if you want efficient and quick delivery you need the private sector to step in.
- “I would have liked to have seen the government use the Budget to incentivise developers to build more on brownfield land, rather than send indirect funds mayoral offices. Ultimately, it’s a gesture towards levelling up rather than a pledge. I would rather the money is spent on the planning system and its inspectorate, because we could easily build more houses a year if the whole planning system was easier and quicker to use. They are treating the symptom not the cause.
- “The elderly are holding our country to ransom. We saw this in the Amersham and Chesham bi-election with those in power putting votes above all else, halting any sign of positive planning reform in its tracks. The idol-worship of the Green Belt has to go!
- “£65m towards digitalising planning system is a step in the right direction, and I hope to see significantly more funds allocated in the coming years to help unclog the housebuilding process.
Hugh Gibbs, co-founder of SearchLand comments on the Chancellor’s funding pledge to encourage brownfield residential development and the Government’s commitment to invest in the digitisation of the planning system.
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?”
Jeremy Heath-Smith, CEO of Spike Global, (www.spikeglobal.com) comments:
On Technology and innovation
“The technology sector has seen unprecedented growth over the past 18 months, as businesses take a digital-first approach to operations. The Chancellor’s new strategy to make the UK a science and technology superpower is a step in the right direction to help UK-based tech companies strengthen their offering and help to address the challenges felt by businesses around the globe. Whether that’s increasing efficiencies, addressing carbon reduction or helping to connect communities, technology has never been more important in driving business and improving lives. We hope the new strategy will help to attract the best global talent ensuring the UK is well and firmly on the tech world stage.”
Jamie Johnson, CEO of FJP Investment comments on the importance of the Government’s levelling up agenda and what it could mean for regional property markets.
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 £1.7 bn 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.”