Strong economic forecasts over the next five years for the country of growth between 2.3% and 2.5% are expected and are being driven in a healthy way via business investment and a growth in exports, not just consumer spending.
It’s estimated another one million jobs will be created over the next five years and even more good news is that job growth is already reaching areas outside of London such as the Midlands (3x rate of elsewhere) and the Northern Powerhouse, spreading the wealth across the country.
The news on tax credits not being cut is good news for the many private renters on housing benefits who are in the PRS because successive governments haven’t and don’t seem to want to, provide social housing anymore.
This growth is set to continue despite the economic cuts (mostly to the running of government administrative parties) and headwinds of a weak Eurozone and world economy.
From a housing perspective, all of this is good news as a strong economy normally results in higher wages and consumer confidence. Both of these helps to drive a healthy housing market where people can move more easily. However, the government and the industry needs to make sure this doesn’t cause house prices to go up too fast and furious or, as we know, they are likely to come down again with a bang.
Local investment which may drive economic and housing growth
Areas which were highlighted for additional investment include:-
Additional investment like this can mean a change in housing requirements will be needed and it is worth checking if there are investment opportunities to provide additional housing supply in areas of need.
Bear in mind though, although additional investment can lead to better returns economically and in housing, it doesn’t always go hand in hand and with the increased effort to build more homes in line with population, it’s important not to invest just off the back of the promise of increased investment as higher natural price or rental growth is never guaranteed.
Infrastructure changes and Apprenticeships
Massive growth of 50% investment in infrastructure, delivering the largest road investment programme since 1970s; (according to George Osborne’s numbers) electrification of various train lines and the start of the controversial High Speed Two and creating 500 new free schools to create hundreds of thousands of more school places.
This is potentially huge from a housing perspective. The reason for this is firstly apprenticeships are much needed in the UK and in particular in the building sector, especially if they can be recruited from the high level of young people still unemployed. This initiative could create some super job and economic growth.
The second implication is that this kind of work could well increase the requirement over the coming years for serious amounts of temporary accommodation for those workers providing the infrastructure and if this, coupled with the new million new jobs, does all come forward and the economy continues to grow, people’s ability to buy homes as well as pay more rent could boost housing returns more than currently forecast.
Read - Help to Buy a New Build
What’s happening to housing? A lot!
Here are the key points:
Releasing public land for 160,000 homes
Re-classifying unused commercial land
Its fairly clear that this government is behind home ownership, which is a good thing for the long term, but totally at odds with the fact that the biggest growth sector in housing is private renting as not everyone doing so wants to buy.
Indeed it’s clear that the biggest supplier of private rented homes ie buy to let investment is being discouraged and although there is government support for build to rent, what institutions can provide is a real drop in the ocean compared to investors buying existing homes, particular ones which need work or need to be sold quickly to a cash buyer. The 3% increase in stamp duty although it shaves some of capital growth off investors returns it’s not enough, in my view, to deter them, especially as it's tax deductible from CGT. To have real impact this will require a hike in capital gains tax in line with income taxes, suggested by many political parties prior to the election (bar Conservatives) so to some extent investors have still got off relatively lightly.
Any support which means we turn old prisons and public land into housing however is superb.
We just have to hope that the industry delivers and that we don’t end up with a bizarre situation of too many homes being provided for sale and a lack of homes available for rent.