A more optimistic outlook has been emerging in the 2nd quarter of 2013 as property prices appear to be firming and buy to let mortgage applications are reaching levels not seen for several years – see our story in this issue “Buy to Let Soars”.
Caution is needed though, as despite the economy coming out of negative if hardly neutral territory, growth is slow and likely to be so for some time; the employment rate has declined slightly and inflation is still an issue. With wage increases year on year around 0.8 per cent and inflation still above three per cent, many consumers (rent payers) are under constant financial pressure and likely to be so for some time yet.
Hometrack has pointed out that despite the generally healthy residential rental market, it’s patchy, with many parts of the country effectively “inactive” rental markets where long void periods are likely.
Much of the optimism to-date stems from money printing (Quantitative Easing) by the Bank of England, plus Government initiatives like the “Funding for Lending Scheme” (FLS), in an attempt to get the economy up to “take off speed”, and it appears, using housing as their “afterburner”.
The danger is of course than, given the shortage, another housing boom is created.
A big concern of government at this time must be the successful introduction of Universal Credit, a new system where a multitude of benefits are reduced to a single payment to recipients, adjusted in real time through the PAYE system and all to be claimed on-line – See “Direct Payment Demonstration Projects Extended”.
One element of this, direct payment of rent money (Housing Benefit) to social tenants, similar to the system in operation for private tenants for some years now, must measure high on the scale of risk to this whole project. The government has an awful track record on IT projects, so this one is high profile, and must be made to work to avoid political suicide. On the other hand, if they can pull it off the benefit to our society will be enormous.
Several direct payment pilots have been running with local authorities and social housing providers up and down the land and the government have just announced that they want to learn more and gather more data by extending these pilots by another six months. So far results appear to have been mixed, so it remains to be seen what the final outcome of these trials will be.
It’s interesting to note the need for caution. When the system of direct payments was introduced for private landlords several years ago government concern appeared to be less in evidence; it seems it’s acceptable for the private sector to shoulder risk, a rather different matter when government money and reputation are involved?
It now seems that government may back-track on its proposals in the Queens Speech that all landlords should be responsible for checking residency status when letting their property, at the risk of a criminal prosecution. It now appears the checks will be confined to problem areas only.
The proposal brought such an outcry from landlords and their representatives that the government appear to have got cold feet. Personally, I can’t see what all the fuss was about as doing an extra simple check would be fairly straightforward and to some extent this is done already when landlords and agents do thorough ID, credit checks and referencing. But criminalising landlords for this was perhaps a step too far. See – “Immigration Checks on Tenants to be Watered Down”
Structural change in retailing in the UK means that around one in five shops could closed between now and 2018 and in some mainly northern areas the loss could be as high as one in three, that’s according to a recent research report.
This change, which is being brought about by the way we now shop on-line and out of town, has huge implications for jobs, town centre environments, commercial property landlords, and indeed all of us: much of the money invested in pensions and savings finds its way into commercial property funds.
A recently published Centre for Retail Research (CRR) report – Retail 2018 – concludes that High Street shopping will continue to decline as online shopping rises steadily over the next five years, and warns that many High Streets could see more than 20% of their shops close down.
With the possible loss of around 60,000 shops and 316,000 retail workers, the CRR believes the future for many town centres is a big shrinkage in retail space and an increase in housing development, using redundant commercial premises. For the full story see – “New Report Predicts High Street Decline”
Tom Entwistle, 31 May 2013