The UK government White Paper earlier this week on the property market has created some eye-catching headlines. There seems to be a step back from the homeownership promise in the Tory party manifesto, red tape will seemingly be cut but under the surface, is there a sign it is now time to revisit the UK buy to let market?
Taxes, taxes, taxes
While the government of the day has to be seen to be doing “the right thing”, over the last couple of years there is no doubt that the buy to let market has suffered more than most. The dilution of various tax incentives together with an increase in stamp duty has done nothing to improve the attractions of the market. Let’s not forget, the buy to let market in the UK has increased dramatically over the last few years and many expected this to continue for some time to come. However, towards the end of 2016 a number of buy to let investors went public about their concerns.
It is no secret that some of the more high-profile buy to let investors in the UK have been reviewing their portfolios in light of the increased costs. Indeed a number have already started the ball rolling with regards to reducing their portfolio in the short to medium term. At a time when the UK government seems to require the assistance of outside investors to fulfil housing issues up and down the country, why increase taxes?
Reduce red tape
There were many deliberately eye-catching comments in the White Paper but one which seems to have gone unnoticed by many is the proposal to reduce red tape. At the end of the day, the more drawn out planning permissions and other notices the longer the payback period for finance used to acquire property. Therefore, it goes without saying, a reduction in red tape will allow debts to be paid back much quicker and thereby reduce long-term finance costs. We have seen these promises issued before, we have seen schemes put in place before, but we can only hope that the government is good to its word this time.
It will also be interesting to see how local authorities compare and contrast with a much more transparent housing policy system. The local authorities up and down the UK will be forced to make public their local housing policies which should give us an idea of which councils are proactive and which ones are perhaps sitting on their hands.
Move away from homeownership
Homeownership has been a central part of the Tory manifesto for many years now. Indeed it is common knowledge that Margaret Thatcher’s “right to buy” scheme in the 1980s actually kickstarted the UK homeownership era. The fact that specific mention was made of affordable rented housing in the White Paper would suggest that the government is now moving away from a focus on homeownership.
This will certainly play into the hands of the buy to let market, but if buy to let investors are encouraged to spend their money, will this not push house prices even further beyond the reach of first-time buyers? Even though there will be pressure on local authorities to increase their own housing developments it seems that the government has finally waved the white flag and admitted it needs help from private investors.