This week we’ll be looking at the key property issues ahead of the election and what they will mean for property investment. First up – new housing targets.
One of the key talking points of this election already has been the amount of new homes each party is pledging to build over the next five years should they move into 10 Downing Street after May 7th.
It’s with good reason, too. In the UK today, it’s estimated that we need to build 245,000 new homes each year to keep up with demand. However, about half that number have been built in each of the last six years.
That’s why the housing crisis is a key area of focus, with firm action needed to get the homes that Britain needs built.
Here’s what each party is pledging in an attempt to tackle this current undersupply:
- 200,000 new homes available at 20% discounts for first-time buyers under 40
- 275,000 affordable homes by the year 2020
- 200,000 new homes each year
- 50% increase in first-time buyers by 2025
- 300,000 new homes each year
- Introduction of a rent-to-own scheme
- Local authorities encouraged to identify 15 years’ worth of housing supply
- 200,000 new homes every year
- Review the current Help to Buy scheme
- Local authorities to dictate how many new homes are built in their areas each year
- 500,000 new homes available each year by 2020
- End current Help to Buy scheme
How would these pledges affect property investment?
Naturally, more new homes could help more people to get onto the property ladder, although this would still depend on cost and people’s ability to afford mortgage deposits. Of course, this could be helped with the continuation of schemes such as Help-to-Buy, and the introduction of a Rent-to-Own system pledged by the Liberal Democrats.
But for those that are ready to buy now and are simply waiting for suitable property to become available in their desired area, this could see a reversal in the current decline of owner occupancy.
It would also see increased pressure on developers to build the required number of homes each year. Therefore, it will be interesting to see what these targets could mean for land and planning authorities and their developer approval rates.
However, the supply of new homes will not affect the demand for certain types of rental accommodation, only those house that people are ‘forced’ to rent in. Any increase in the number of new homes built will still not remove the demand for property in the private rented sector (PRS). There has been a generational shift in the UK in recent years, and there is now a distinct need for transiency and flexibility, with people needing the freedom to move easily for work and business.
Whilst there is still that demand to rent, more new homes could lead to an increase in activity in the buy-to-let sector (except those built solely for first-time buyers), as more investors will have the opportunity to find a property to purchase with the intention of renting it out. It will also mean that capital returns could decrease, with more investors now switching their focus to the PRS and potential yields they could achieve.