With a new Prime Minister, also comes a new Chancellor, and Kwasi Kwarteng will give everyone a view of where his – and Liz Truss’s – priorities lie this week when he announces his ‘Mini Budget’.
It is an interesting turn of phrase to describe this as ‘Mini’ when we could perhaps, more correctly, call it an ‘Emergency Budget’ such is the need for Government action in so many areas.
Following in the footsteps of the Government’s announcement that it will freeze the energy cap, this further setting out of a number of other actions to be taken, has all the hallmarks of being anything but ‘mini’ in scale, and instead could mark a further wholesale intervention.
During her campaign hustings, the new Prime Minister announced a number of tax cuts she wanted to make, plus it is widely expected that she/Kwarteng will reverse the increase in National Insurance announced in September. That increase was deemed necessary to pay for social care reform and the NHS, so where – if anywhere – will this money now come from?
In our corner of the economy, we await to see what the Government plans to do in the housing and mortgage markets. It seems fairly certain that previous housebuilding targets will be jettisoned, although in favour of what seems moot.
The Government Guarantee scheme finishes at the end of 2023 and has undoubtedly helped support greater levels of high LTV lending, acting as a catalyst and providing confidence for lenders to be active in this much-needed mortgage space.
We are also just over a month away from when the last Help to Buy scheme registrations will need to have been made, as this comes to an end next March. Both these Schemes have supported first-time buyers specifically onto the housing ladder – will this ‘new’ Government seek to fill any gap, or will it allow the industry to find its own solutions from now on?
Turning ‘Generation Rent’ into ‘Generation Buy’ has been a priority for Conservative Governments over the last decade, and it would be odd to see no ongoing help for first-timers, particularly as the Conservatives might feel they need to broaden their appeal to a younger voting audience.
In a wider sense, purchase activity appears to be slowing down, however there has been some evidence recently that the supply of homes coming to market is improving. Bringing a level of equilibrium to the market would be helpful in terms of stabilising prices, and also in terms of mortgage affordability, which is clearly being hit by the increase in the cost of living.
Whether the Government might want to do more in this area remains to be seen. If those housebuilding targets are quietly ripped up, what can it do in order to help house building firms and developers meet demand?
There have been some suggestions of Government loans to smaller and more medium-sized developers to help them meet their costs, plus of course, the hardy perennial suggestion of a stamp duty cut/holiday for those who can start developments straight away.
Liz Truss talked about getting spades in the ground when she took office, and there is clearly going to be a need to provide an environment where house builders can get on and bring property to market in a much quicker timescale.
Easier said than done, particularly with the planning laws we have and there may be action here, plus of course any focus on new-build has to bake in the need for energy-efficient properties going forward, given the huge focus and pressure on household energy bills right now and the Government’s own need to meet its net zero targets.
Whether we get a clear understanding of this Government’s policies when it comes to the UK housing/mortgage market this week, seems doubtful, but it will be important for the industry to understand what the direction of travel is. And soon. From my perspective a continued focus on measures to speed up the home buying and selling process can only be a good thing and should be pursued vigorously.
Plus, there is a need to look beyond purchase. The supply gaps we have in our market don’t just mean issues for those wanting to buy, but clearly for those looking to rent as well. Increasing the supply of homes available in the private rental sector has not been a priority for many years – if anything recent Governments have attempted to take supply out.
That focus has to change now otherwise rents are going to continue to rise because more and more landlords will leave.
Those with housing/mortgage-related briefs in this new Cabinet will need to view supply in the round from now on, rather than a one-eyed look at owner-occupation/first-time buyers that misses the reliance millions of people in this country have on other tenures.
Mark Snape is chief executive officer of Broker Conveyancing
