"'Invest in the PRS if you’re an institution, but we don’t want individuals doing the same’"
For the former, so intricately linked with the latter, we have seen the publication of the Government’s Housing White Paper, which (supposedly) sets out the measures that are going to fix our ‘broken housing market’ – an interesting choice of words when you’ve been in charge of that same housing market for the best part of seven years, don’t you think?
I do have some sympathy for the Government however because this has been a problem exacerbated by administrations of all hues over the best part of the last three decades. I fear that it will take a similar amount of time to actually get to a point where housing supply actually meets demand, and three/four-year time frames are simply not going to be enough to fill the housing gap. I’m still of the opinion that this problem requires a cross-party solution but I’m not naive enough to think we’ll actually get one.
That said, this White Paper does (on the surface at least) appear to include some level of joined-up thinking however whether there’s actually anything new and dynamic within the proposals to get us up to the Holy Grail of 225-275k new homes per year is another matter entirely. Plus of course for every year that we don’t hit those figures, the deficit grows bigger, and there is a very real issue with building affordable homes in the places where people want, and need, to live. I wish the Government luck but I’m not holding my breath.
In the mortgage market, the year appears to have begun as it ended. It’s quite clear from the CML’s latest statistics, for example, where the transactions are happening. The remortgage market – fuelled by considerable lender competition – remains strong in both the residential and buy-to-let spaces. However, when it comes to buy-to-let purchasing we have seen a real drop-off in activity levels, prompted by the Government’s intervention in terms of stamp duty increases and tax changes, plus of course the PRA’s underwriting measures which were introduced at the start of 2017 and mean increased checks and affordability hoops to jump through.
There are hints of purchasing inching up, but the numbers of landlords buying buy-to-let properties are nowhere near what they were in 2015. Overall, the Government’s concerted attempts to move more properties out of the private rental sector and into home-ownership appear to be working. Which, returning to the Housing White Paper, make the statements of support it includes for the PRS even more bizarre.
In the White Paper, the Government talks about building more homes to rent and also highlights the need for more institutional investment in the PRS. But, this it would seem does not extend to individual landlords, who they are actively hitting with their stamp duty and tax measures. The somewhat confused message appears to be: ‘Invest in the PRS if you’re an institution, but we don’t want individuals doing the same’. I think it’s fair to say that this focus needs a lot more work.
The beneficiaries however appear to be first-time buyers, who have grown in number over the last year. While, I’m sure we all know, it is still difficult getting first-timers onto the ladder, they are benefiting from a more benign environment. Even with the end of the Help to Buy 2 scheme, lenders appear to be still willing to offer higher LTV mortgage products which means that if they can find 5/10% deposits then there are mortgages available for them. The introduction of the Help to Buy ISA – and the new Lifetime ISA in April – also provides a savings benefit in the form of Government bonuses, so there are glimmers of hope for those who can make the savings necessary for their deposit.
Overall, the housing and mortgage markets look likely (in 2017) to emulate the 2016 version. We should not anticipate greater transaction volumes but the same sort of levels seen last year with hopefully a visible step-change in the number of affordable homes being built. The proof of this particular pudding however will be in the eating.
