Everybody spends these winter months contemplating the changes they would like to make in their lives, businesses or even society. And we all know how easy it is to have good intentions, and then fail to maintain the changes that we imagined in our New Year resolutions. One of my colleagues perfected the art of the tiny improvement that he really could embrace. I think my favourite one of his resolutions involved polishing his shoes more regularly – hope he managed to keep it!
My recommendations sit firmly in the opposite camp – big, bold and capable of changing both the UK property market and economy for the better.
Let’s kick off with the supply of houses in the market – the so-called housing crisis. Most commentators suggest that we need to build around 300,000 homes a year and in 2016/17 the actual number built was just over 217,000; a sizeable gap of 83,000. I believe there would be two essential ingredients to closing the gap and delivering a steady stream of affordable homes. The first piece of the jigsaw involves the best piece of housing news in 2018, which was the Government announcing the re-invigoration of social housing (and thereby Housing Associations). As a country, we need to shed this ridiculous notion that all homes need to be bought and our homes are one of our principal investments. Many of the developed economies of the world embrace long term rental models and would totally fail to understand the stigma in the UK of any housing model that doesn’t involve outright purchase. The second piece of the jigsaw is we need a revolution in building technology. There simply aren’t enough skilled tradesmen in the UK (after a continual decline in apprenticeships) to build the volume of homes needed. Alternative building methods are here now and innovative organisations like the Home Group in Gateshead are showing that modular build technology is a reality today. All modular build styles share the common theme that repeated sections of houses are manufactured off-site and then installed on-site. Speed of building is dramatically improved, and costs will fall when volumes and competition increase.
My second recommendation would stamp out stamp duty – a completely dysfunctional tax on homebuyers. All modern economies rely on labour being rapidly able to move to match emerging jobs. Stamp duty serves to discourage people moving (why move to a better job when the cost of moving is so high?) and has clearly played a major role in reducing transactions. There is some relief for first-time buyers, but the market is now clogged with static property. For example, 40% of property is owned by the over-65s and many of these homes are now ‘empty nests’ with many unused bedrooms. It is easy to ‘tut tut’ at people not moving home, but a few examples might just make the point. The duty on a £300,000 home is £5,000 (perhaps okay?), £600,000 home is £20,000 (ouch, the price of a good family car) and at £1m is £43,750 (better to stay put, employ a gardener and a cleaner and keep money in the bank!) I know the tax deficit would need to be found elsewhere and it really is time to address reality and consider land or property tax. There would need to be much detailed thought in implementation (how to protect low income, high capital families etc), but continuing with a transaction tax that damages our economy is simply madness.
And my final recommendation involves England’s famous house buying process. A martian landing in Yorkshire would enjoy a buying process that involves people making non-binding bids on property with next to no detailed information; buyers and sellers completely able to change their minds for weeks if not months on end; gazumping or gazundering depending on market conditions and stress everywhere. Research suggests around one third of all sales fall through before exchange of contracts at a financial and emotional cost to buyers and sellers alike. My dream 2019 would involve sellers having to produce compulsorily a property condition and searches report available to all buyers; buyers having to demonstrate available funding and a conveyancing process that was legally binding after a dramatically shorter timescale. There’s little doubt that sellers will object to paying an extra sales fee (everyone remembers the failed Home Information Pack of 2010), so legislation would be needed to improve this aspect of the market. If it feels like an impossible dream, just pop up the A1 to Scotland to see a better system or if you’re feeling adventurous, jump on a plane to NZ or Australia.
So, the property market in 2019 really needs a good old-fashioned shake. It’s time to stop only building homes in the same way we have for the last 500 years; stop taxing property transactions in a way that damages local economies and family life and time to reform a buying system so old fashioned that we could close our eyes and be back in the Middle Ages.
Here’s to a robust and challenging 2019 in the Yorkshire Property market!