Lack of finance is imposing a straitjacket on the UK housing industry, it is claimed
06-08-2012
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Nevertheless prices are being reinforced by a lack of supply, low interest rates and, in central London, strong demand from overseas buyers, it says.
The main conclusions include stamp duty rates creating market inefficiency and stifling activity. ‘We suggest that stamp duty rates are reduced across the board and that a progressive marginal rate replaces the slab structure,’ says the report.
It also concludes that house building is at chronically low levels as finance, economic and housing market issues are constraining development and suggests that innovative ideas such as developing for sharers, targeting investors, initiatives to encourage the release of family housing or a new PRS use class could help.
The firm is forecasting 0% house growth for the UK this year but increases next year and in the medium term as supply shortages constrain choice when demand accelerates. London and the south will outperform the rest of the country.
Given the continued mortgage availability and deposit requirement problems facing aspirational home buyers, renting is forecast to expand further in the coming years. The main questions are where the stock will come from, who will invest and what happens when buying becomes more viable, says the report.
‘The 2012 Budget provided much needed support for residential REITs but we do not believe initiatives go far enough in encouraging institutional involvement sufficient to boost either housing supply or institutional PRS ownership,’ the report points out.
‘We believe that the National Planning Policy Framework is intuitively sensible and is a step in the right direction in terms of advocating brown field sustainable development. But we need to release some green field land, as well as other proactive initiatives, if new development is to come anywhere close to meeting expected need,’ it adds.
The report also shows that the new Central London development market has slowed a little in the second quarter of 2012 but the best schemes are still selling exceptionally well. However, the 2012 Budget has left parts of the London residential market in limbo with some potential buyers and owners unsure of what to do. ‘But once the new rules and taxes are confirmed we strongly believe that the London market will return to greater strength,’ it adds.
The Budget, as well as other influences, has also led to a quieter second quarter for the Prime central London market. ‘Price growth is positive, but barely so. Rental values are falling marginally as tenants balk at the higher rates, downsize or move to cheaper parts of London,’ the report says.
Neil Chegwidden, residential research director at Jones Lang LaSalle and author of the report, said further measures are required. ‘More innovative solutions are needed if serious inroads are to be made into the obvious, fundamental and medium term problems within the UK housing industry,’ he concluded.
