While the Labour government has been waxing lyrical for many months now about a significant investment in UK residential properties, it seems that finally the Conservative party is coming around to a similar way of thinking. While nothing has yet been confirmed, Conservative politicians have today been hitting the media suggesting that the forthcoming budget could hold a number of surprises with regards to UK residential properties. So, what can we expect and will the government actually deliver?
When you bear in mind that UK interest rates are near their all-time low it does seem a sensible time to borrow money for infrastructure spending. Infrastructure in this case will include social housing with rumours that the initial figure of 25,000 new social housing properties in the UK could reach as high as 500,000 new properties overall. If you take a step back and look at this from a distance, let us work on a suggestion that a new property cost 2/3 to build compared to its final value. So, if a new build social housing property is valued at £100,000 then in theory the cost is around £66,000, leaving a £34,000 uplift.
Even if the local authorities were to offer a discount to long-term tenants, likely to be the case, a sale at around £80,000 would still yield a paper profit of £14,000. In theory, if the building and the eventual resale of the property was carried out on a no profit basis, then this would not have any impact upon long-term government borrowing.
Recycling brownfield sites
For some time now there has been speculation that the UK government would relax regulations regarding use of greenfield property for residential and commercial development. The idea was that investing money into the UK construction industry would help the economy, improve the employment numbers and ultimately lead to more houses. However, while we await the forthcoming budget it looks as though there will be more focus on so-called brownfield sites where there may have been issues in the past which can now be tackled by new technology.
There is even a suggestion that despite the fact London would appear to be “chock-a-block with houses” the density of London property is actually lower than the likes of Paris and Berlin for example. This would suggest that there is scope to build more properties in London but would this impact the higher end of the London property market where large developments are prominent?
Winning hearts and minds
We do seem to be in a bizarre situation regarding UK residential properties with the Conservative party seemingly on the verge of “pinching” an array of Labour party ideas. The main difference in the eyes of the general public is probably the past reputation of the two main parties when it comes to managing finances and controlling debt. However, even the most ardent Conservative would readily admit that a resurgent labour party under Jeremy Corbyn is making Conservative politicians extremely nervous.
Are they really about to pinch some of the core policies of Jeremy Corbyn? Is capitalism dead or simply taking a standing eight count after taking a bit of a battering?