What Does the Autumn Statement Mean for UK Property?
Chancellor Phillip Hammond’s long awaited Autumn Statement was released on Wednesday the 23rd of November. It was the first major economic statement since the UK voted to leave the EU 5 months ago. Prior to the official release, Mr Hammond warned of higher borrowing and slower growth. (1)
Here’s a summary of some of the discussed plans relating to property:
1. Lettings agents will be banned from charging fees to tenants. (2)
Overview
- Lettings fees are said to cover a variety of checks on tenants before letting a property, such as references from guarantors and credit checks. (3)
- Typically, the fees cost £223 according to the latest English Housing Survey. (2) However, Shelter conducted research in 2012, which found that “one in seven tenants pays more than £500.” (2)
- In total, the cost of a deposit, rent in advance and the average cost of a lettings fee, is over £1,000 across the country and above £2,000 in London. (2)
- The surrounding concern stems from speculations that “some lettings agents are also accused of profiting by charging both the landlord and prospective tenant for the same checks.” (3)
- It is predicted that “shifting the cost to landlords will save 4.3 million households hundreds of pounds.” (2)
- “Previous calls for bans have been ignored, including by David Cameron’s government who resisted calls to implement a ban, warning the costs would rapidly pass back to tenants in the form of higher rents.” (3)
Potential Consequences: Rise in Rent
- David Cox, managing director of Arla, the Association of Residential Letting Agents, explained, “A ban on letting agent fees is a draconian measure, and will have a profoundly negative impact on the rental market.” (2)
- In addition, he added it will “do little to help cash-poor renters save enough to get on the housing ladder. This decision is a crowd-pleaser, which will not help renters in the long-term.” (2)
- “Richard Price, director of the UK Association of Letting Agents said: Arbitrary bans sound appealing.” (3) However, “A ban on agent fees may prevent tenants from receiving a bill at the start of the tenancy, but the unavoidable outcome will be an increase in the proportion of costs which will be met by landlords, which in turn will be passed on through higher rents.” (3)
Case Study: Scotland
- Luckily, Scotland provides us with an existing case study. “Since a ruling in 2012, tenants in Scotland can only be asked for just the rent and the deposit – everything else has to be paid by the landlord.” (4)
- Some Scottish lettings agents have argued that rents did rise when fees were banned. (4)
- However, “A House of Commons select committee decided the evidence was inconclusive.” (4)
2. Extra £1.4bn to build 40,000 new homes (5)
Overview
- Phillip Hammond is set to increase the construction of affordable homes.
Comparisons
- “It is estimated that at least four million people of working age in England would need affordable housing by 2024, according to the Local Government Association.” (2)
- In addition, “The average first time buyer paid just under £30,000 for their new home in the 1980’s compared with more than £150,000 now, according to the Resolution Foundation.” (2)
- “Local authorities were building 100,000 homes a year up to the late 1970s, but the election of Margret Thatcher’s Conservatives in 1979 let to a fall in house building by local authorities.” (2)
- “In the year to the end of June, local authorities built 1,500 homes in England out of a total of 131,370 – that is just over 1%.” (2)
- This comes as a welcome relief to many, as Hammond notes himself, “for too many the goal of home ownership remains out of reach.” (5)
3. £2.3bn housing infrastructure investment to help build 100,000 new homes in high-demand areas (6)
Overview
- Phillip Hammond announced, “We will focus government infrastructure investment to unlock land for housing.” (5)
- “With a new £2.3 billion Housing Infrastructure Fund to deliver infrastructure for up to 100,000 new homes in areas of high demand.” (5)
- “And we will relax restrictions on government grant to allow a wider range of housing-types.” (5)
4. £7.6m Grant for Repairs to Wentworth Woodhouse (6)
Overview
- Wentworth Woodhouse is near Rotherham, and acted as the inspiration for Pemberley in the classic novel Pride and Prejudice, by Jane Austen.
- The Grade I listed country house is in fact the largest private house in the UK (7).
Damage
- In 1946, Manny Shinwell, who was the Labour Party’s Minister of Fuel and Power at the time, ordered “a column of lorries and heavy plant machinery.” The objective was “the mining of a large part of the estate close to the house for coal.” (7).
- Local outrage followed, as despite the uprooting of ancient trees and damage caused to “sacred ground,” the coal was of poor quality. (7)
Mr Hammond certainly paid a substantial amount of attention to the property market. It will be interesting to see how these changes play out in the near future, and how UK property investments will react, if at all.
You can read the entire speech here.
Written by Jenna Kamal, Lead Copywriter at Property Moose.
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Sources:
- http://www.bbc.co.uk/news/uk-politics-38068358
- http://www.bbc.co.uk/news/business-38065249
- http://www.telegraph.co.uk/property/renting/letting-fees-crackdown-autumn-statement-will-mean-renters-landlords/
- https://www.theguardian.com/money/2016/nov/23/rents-unfair-letting-fees-tenants-charges
- http://www.telegraph.co.uk/business/2016/11/23/autumn-statement-chancellors-speech-full/
- http://news.sky.com/story/autumn-statement-as-it-happens-the-key-points-at-a-glance-10668794
- https://en.wikipedia.org/wiki/Wentworth_Woodhouse