But also, buy-to-let investors need additional protections to make the UK housing market healthier, so says Johnny Morris, Head of Research at Hamptons International, as it unveils a report into the property market.
Countrywide, Hamptons International and Lambert Smith Hampton have published a joint research report making 10 specific recommendations for a healthier UK property market to be launched at the MIPIM International Property Conference.
The Report, titled “Tonic for Tomorrow: proposals for a healthier UK property market”, a 24 page document which highlights problems in the UK property market, points out some misconceptions, and offers possible solutions.
The Report’s stated aim is to stimulate debate among leading practitioners, trade bodies, academics and government to create workable policies which improve the operation of property markets in the future.
The focus is on building more homes to accommodate a growing population, adding more certainty and flexibility to the planning system and providing fairer property taxes to match changing tenure trends.
Johnny Morris told CoStar.co.uk:
“The demographic, cultural and technological changes affecting the UK property market, many of which have accelerated in pace in recent years, will have a profound impact on how both residential and commercial markets work in the future. Our proposals are aimed at ensuring the property market operates efficiently and seeking out the fairest solutions to meet the changing needs of the country.”
Pointing out that the proportion of renters aged 25-35 had increased from 31 per cent in 2008 to 45 per cent in 2014 it says that it is a misconception that the UK has one of the highest owner-occupation rates in Europe.
In fact, the report argues that the UK rate is comparable to that in the US, and some parts of Europe.
Mr Morris told FTAdvisor.com:
“Shifting tenure trends mean that private renting is increasingly becoming a longer-term option, not just for singles but for larger households too.
“The tools for servicing long-term private renters are only just being developed, and the government policy response so far has mostly been limited to attempts to stimulate institutional investment into a professional rented sector.
“More choice between standard tenancies for six months, one year and three years, with transparent mechanisms for rental uplift, would add certainty to the sector – for both landlord and tenant.”
The report claims that many buy-to-let landlords want to offer longer tenancies but are being restricted because of their mortgage lending conditions.
Another recommendation is to allow local authorities to sell off land cheaply, which the report claims would boost investment in the private-rented sector (PRS).
Mr Morris told FTAdvisor.com:
“Institutional investment into the private rented sector has a role to play both in improving the quality of accommodation, experience of renting and delivering new homes.
“Allowing local authorities to be more flexible with public land disposals, ensuring build-to-rent schemes are viable on scale, could be the key to significantly growing the institutional private rented sector.”
Other recommendations include reform of council tax, adding a new top band, and to make funding available for more shared-ownership homes.
Commenting on the report’s recommendations Sebastian Hurst, an adviser with London-based Plutus Wealth Management told FTAdvisor.com:
“When you are buying property it is very much a long-term investment so people tend to hold it for a while.
“Particularly in London you use it as a growth asset and the yield you are getting is not your main goal, so shoring up any income in terms of tenancy would be quite convenient.”
Report authors Johnny Morris and Oliver du Sautoy summarised their findings for CoStar.co.uk:
Boosting the New Homes Bonus
Morris said: “The new homes bonus has funnelled £3.3bn to local authorities since 2011 and nearly 6% of central government grant to local authorities will come from the new homes bonus in 2015/16. Linking local government income and new home delivery could be a significant step towards creating local support for getting more homes built”
Redefining Greenbelt for modern needs
“The supply of new homes is particularly constrained in and around our growing cities. There are 80 railway stations in the Greenbelt on the fringes of cities across England, our research shows that there is enough unused land in areas within walking distance of those train stations to accommodate nearly half a million new homes. Given the chronic shortage of new homes in certain areas, we may not be able to afford to overlook these potential sites.”
Giving planners time to catch up with policy
“Over the last ten years the fundamentals of the planning system have been in a state of flux following reform by successive governments. Today only half of planning authorities have plans fit for purpose under the National Planning Policy Framework (NPPF). Allowing time for planning authorities to catch up will allow us to see if the plan-led system can work as intended.”
A new more permanent permitted development right (PDR) for office to residential conversion
“While evidence of the impact of PDRs is mixed, headline take up has been high. However the time limit on the current right and constraints on changes to buildings means that few schemes falling with the PDRs have progressed. Allowing under-utilised office space to be converted to housing without the need for full planning consent provides a welcome boost for housing delivery, while removing obsolete office space.”
Helping the high street by widening the retail use classes
Oliver Du Sautoy, Head of Research at Lambert Smith Hampton comments: “We are in favour of the DCLG’s proposal to both broaden the retail use class and allow change of use from retail to leisure via permitted development rights, for example changing record shops to coffee shops. While greater flexibility of use will not by itself arrest the decline across many of our UK high streets, policy should at the least provide a means for businesses to adapt more quickly to local demand and promote footfall back into our town centres.”
Reforming business rates
Oliver du Sautoy said: “We want to see to see a business rates system which is both a fairer reflection of prevailing market conditions and provides stronger support for small businesses. We believe that increasing the frequency of revaluations from five to two years, exempting small businesses entirely from business rates and allowing local authorities to set rate relief areas within town centres would be a significant step towards a fairer system.”
Reforming council tax
Morris continues: “The revaluation of homes for council tax and addition of a new upper band made in Wales in 2005 offers precedent and learnings for how council tax in England might be updated. Our calculations show that updated bandings and the introduction of a new Band I could raise between £500m and £700m extra a year. We believe council tax reform offers a fairer and more practical alternative to a mansion tax.”
Stability and transparency for landlords and tenants
“Shifting tenure trends mean that private renting is increasingly becoming a longer term option not just for singles but for larger households too. The tools for servicing long term private renters are only just being developed and the government policy response so far has mostly been limited to attempts to stimulate institutional investment into a professional rented sector. More choice between standard tenancies for six months, one year and three years with transparent mechanisms for rental uplift would add certainty to the sector – for both landlord and tenant.”
Making build to rent viable
“Institutional investment into the private rented sector has a role to play both in improving the quality of accommodation, experience of renting and delivering new homes. Allowing local authorities to be more flexible with public land disposals, ensuring build to rent scheme are viable on scale, could be the key to significantly growing the institutional private rented sector. More flexible S106 agreements and conditions specifying schemes must be used for private rent would also be important tools.”
Sharing out shared ownership
“The shared ownership market needs to be simplified and opened up. Simplifying the re-sales market and ensuring those that manage to buy their home outright have the same rights as any other home owner are key steps to increasing the appeal of shared ownership.”
Tonic for Tomorrow: proposals for a healthier UK property market can be accessed here
— LandlordZONE (@LandlordZONE) March 12, 2015