Tag Archives: election
Rent controls would not work in UK, research suggests
Rent controls and similar policies which are thought to work well in other countries cannot be easily replicated in the UK’s private rented sector, according to findings from a new interim report. The interim report by the London School of Economics and Political Science (LSE) and commissioned by the National Landlords Association (NLA) looks at evidence from the UK as well as from other countries where stronger regulatory policies are already in place, including Germany, Ireland, San Francisco, New York and the Netherlands. It suggests that in Ireland, which apparently provided the model for the Labour Party’s proposals in the run up to last month’s UK general election, controls introduced in the last few years have had very limited effect. The country is experiencing a housing crisis, with rapidly rising rents and a near standstill in new housing production. In Germany, often cited as the best example of a country with a stable private rental sector, the system of indefinite security and in-tenancy rent stabilisation has in the past been cushioned by low house prices and demand. Moreover, initial rents can be well above current market levels in high-demand areas. It also says that in San Francisco and New York the main beneficiaries are older middle class households and the young hardly get a look in. ‘The report is required reading for those such as the Labour leadership and London Mayor hopefuls, who seem to be ignoring both academic evidence and the overwhelming rejection of similar policies by the electorate last month,’ said Carolyn Uphill, chairman of the NLA. ‘Private rented sectors in many countries, regulated or not, are facing major problems in high demand areas. Market fundamentals cannot just be regulated away,’ she added Kath Scanlon of LSE London said the research found clear evidence that inflexible controls reduce supply. ‘But the strongest message was that what may work in one country cannot simply be transferred to a different market and institutional environment,’ she added. During the election there were also calls to abolish business tax relief for buy to let, alongside the introduction of rent controls. However, the LSE report found that where rent controls are already in place the negative impacts are usually offset by a more favourable tax treatment of landlords, an area which the UK falls behind in comparison with other countries. ‘The taxation of buy to let is a touchy subject for some, even though landlords in the UK receive no special treatment compared to other businesses. This report reinforces why successive governments have chosen to treat landlords as businesses. Doing so encourages best practice and, above all, helps to ease the housing crisis,’ Uphill concluded. The full details of the report are due to be published later this year and will include more detail on London. Continue reading
Buy to let surges in UK as first time buyer activity retreats
May has seen an acceleration in property valuations for buy to let landlords, while first time buyer activity has retreated, according to the latest research. There were 33% more buy to let valuations conducted in May than at the same time last year. Conversely, valuations for first time buyers declined by 4% over the same period, the data from Connells Survey and Valuation shows. On a monthly basis, May’s buy to let valuations were up 3% on April, while valuations for first time buyers fell 2% between the two months and the buy to let market is booming, according to John Bagshaw, corporate services director of Connells Survey and Valuation. ‘Would be landlords are eager to enter the sector and current landlords look to expand. However for first time buyers, May was not just less positive than the rest of the housing market, but also disappointing in comparison to the previous month. Previously, valuations for new buyers had proved resilient in April, even with uncertainty about the impact of the election result on home buyers,’ he said. He explained that fewer people are looking to buy their first home means more tenants sticking to the rental sector. ‘As such, new landlords enter the market and those already in the sector grow their business to capitalise on the increased demand. Yet what remains unclear is how long this contrast in fortunes will continue,’ he added. May’s remortgaging figures also outperformed the overall housing market, with these valuations up 9% on April’s figures. This equates to a 31% increase on the number of remortgaging valuations since May 2014. Meanwhile, valuations for those existing home-owners looking not to remortgage but to move to a new property posted a 4% increase since April. This has contributed to an 8% increase in the number of home-owner valuations since May 2014. ‘Remortgaging is going from strength to strength right now. Record low mortgage rates are the main reason for this, and with inflation still near zero and flirting with a negative reading, the Bank of England is likely to play it safe and keep rates at bargain-basement levels for the foreseeable future,’ said Bagshaw. ‘Yet the recent cooling in home mover activity points at another cause for the remortgage rush. Increasingly, home owners are opting to upgrade the property they already have, be it through a loft conversion, conservatory or major face lift, rather than sell up and get a new one. In short, people are improving not moving,’ he pointed out. He believes that people feel financially secure enough to use their home as a guarantee against which to raise big capital, a sentiment that was absent for some time immediately after the economic crash. ‘However, they still don’t feel the property market overall is safe enough to risk trading up what they already have. For a government reliant on movement… Continue reading
Modest price growth predicted for UK residential post general election
Continuity and stability has returned to the UK residential property market following a period of uncertainty where the threat of mansion tax amongst other measures caused a pause in activity. According to the latest market analysis from JLL the prime London market in particular breathed a sigh of relief as the prospect of mansion tax evaporated when the Conservative party won the general election last month and modest price growth is predicted in the short term. ‘Whilst in the six month run-up to the election the number of transactions recorded in some areas of the prime market cooled by a third. The question now is how strong the demand bounce will be and if we will return to the heady unsustainable rates of growth that fed the market in the 2009,’ said Adam Challis, head of residential research at JLL. The real estate advisory firm believes that whilst there will be a renewed level of demand in the prime central London market, underpinned by a more balanced supply backdrop, this will take some time to have an impact. ‘We have seen strength in activity resume in the prime central London market but we predict this to stabilise as the industry settles down and the new Government beds in,’ Challis explained. The report says that in central London new build activity, off-plan sales remained robust in the first half of 2015, with some sensitivity for high value property. Development activity has been shifting towards outer areas over the past 12 months, with annual starts up by 59.3% in contrast with central London, which is down by 43.2% over the year. Looking forward the firm believes that the focus needs to be on supply solutions that will tackle the real issue facing the UK housing market. ‘Policies to date have been about the demand-side solutions but Government needs to concentrate on policies that can drive a step change in supply solutions. Whilst these will take some time to bed-in and manifest themselves, they will be the solutions that ultimately provide the help where is it needed most,’ said Challis. JLL predicts that with five years’ worth of clear runway to aim at, it expects to see a continued rate of growth in housing market transactions that have been slowly gathering momentum since the Conservative majority victory on 08 May. The firm predicts that pricing is likely to remain under upward pressure, in line with a healthy, stable economic backdrop, real income growth, near term political risks subsiding and a sclerotic housing supply response will all play out. ‘Political risks are always present in residential markets. The UK needs a Government that actively seeks to provide certainty so that markets can behave efficiently for the benefit of the economy,’ Challis explained. However, the firm points out that with certainty and stability resuming, there are, however, three political changes that may create renewed tensions in the housing market; the European Union referendum, regional devolution driven by Scotland… Continue reading
