Spending Review: More Property Industry Reactions


Thursday 21st October 2010

Chancellor George Osborne unveiled the largest cuts in generations yesterday, but what does the housing industry think of the announcements?

Click Here To Read Lots More Comments From Various Property Professionals

Andrew Froude, the Chairman of Jackson-Stops & Staff, says: "The contents of the Chancellors review came as no great surprise as most of the measures announced had already been anticipated.

"The housing market has already adjusted to the present economic climate and there has undoubtedly been a slowing of activity partly for this reason and partly seasonal. But the level of activity is still well ahead of the 2008 low and Jackson -Stops & Staff do not anticipate a double dip recession. The spring market will provide the true test."

Phil Bateman, director of Greater London Properties, comments: "I do not foresee the cuts having a huge impact on our area of expertise in The West End. The vast majority of our applicants, both for sales and lettings, tend to be from either overseas or the higher end of the pay scale where jobs are generally secure, for example fund managers and senior management roles within private companies. I do not see how the proposed cuts can have a huge impact for our day-to-day clientele."

Camilla Dell, managing partner at Black Brick Property Solutions LLP: "These latest spending cuts are likely to impact on house prices generally across the UK. Transactions are likely to be affected as people start to feel the pinch. However, in central London, property prices will be far less exposed as the market is buoyed by international buyers and a lack of supply."

Charles McDowell, prime London property consultant: "The Chancellor's emphasis on the value of the financial sector to the British economy today is a welcome confirmation that the government appreciates the sector's contribution, as long as the details of the permanent tax levy on banks don't belie his words today. Prime London property continues to increase in value with interest from both domestic and international buyers but hopefully, with the comprehensive spending review behind us, general market confidence will improve. "

Louise Reynolds, Property Venture: [The cuts] will dampen any property-buying activity in the UK. Whilst it may only take a two percent rise in private sector employment to absorb the public sector redundancies [according to Robert Peston], it will feel a whole lot more serious than that, for those facing a potential job axe.

What's more, we are likely to see more house sharing in the UK and a possible proliferation of HMOs [Houses of Multiple Occupancy] as the Local Housing Allowances are capped and many people on benefits will no longer be able to live in their own properties. They have to consider a cheaper, property-sharing alternative, in the same way that students or some potential first time buyers do under the age of 30 who are saving to get on the property ladder.

Tim Hassell, managing director, Draker Lettings: "Supporters of the coalition government's recent actions may argue that by 'grasping the nettle' and taking control of the fiscal deficit people will be much more confident about the direction they are heading. Optimists will argue it will trigger increased activity, bring more people into the financial arena, and most importantly for the lettings market, increase corporate relocation.

"This same confidence in knowing that fiscally the news is bad, will possibly continue to buoy up the sales market, keeping lettings stock levels down and the supply versus demand ratio tipped in the landlord's favour.

Uncertainty is often more disabling to a market than good old bad news. People with an opposing view of the government's actions may believe that they are cutting too quickly and too deeply, creating more uncertainty about the future. This could cause a negative effect on the sales market resulting in people becoming very cautious about buying; creating a build up of stock in the lettings market and bringing prices down.

"However, the interesting point is people not buying may rent instead, but only if they have managed to sell. It is a tough call to predict where supply and demand would fall if this were to happen. For the record, my money is on the former."

Tim Hamilton-Miller, Associate in Knight Frank's Affordable Housing team: "Guidance on how the new tenure is to operate and how planning authorities review viability cannot come fast enough. The new 'variable rent tenure' is to be charged at levels between social and market rents and offered with regular reviews - no longer 'for life' - and housing associations are therefore going to be hard pushed to put a value on new homes. The old system was fairly formulaic and gave certainty to future rents so new homes were straightforward to price.

"Coupled with this uncertain rental stream, social housing grant is also, as widely expected, being slashed. For some regions [like London] this leaves no subsidy for fresh schemes over the coming 18 months. Removing grant can halve the value that a developer receives from the housing association. Housebuilders are already hard pushed to access bank funding to get new schemes out of the ground and this news will darken the horizon further.

"It is therefore essential that updated guidance is published and new appraisal tools put in place as soon as possible on how the new 'variable rent' tenure will work in order to deliver the 150,000 new homes pipeline proposed and to maintain the Affordable Housing Sector's Blue Chip covenant status to lenders."

Kate Faulkner, managing director of Designs on Property: "From an initial perspective, the government's current policies and cuts will hold people back from moving home, so the market will have little chance of recovering too much from the 600,000 properties we are selling every year today, versus the 1.2 million we normally sell every year.

"Property stock will be held back too, with less new homes being built [both public and private], exacerbated by a vacuum in housing policy and the continued tightening of mortgage lending, particularly on new homes.

"LHA allowances will soon be cut, which in many areas in the South East and beyond could lead to a dramatic fall in the availability of private rental property for LHA tenants, exacerbating the issues for local authorities, especially those actively trying to work with the private sector to reduce ever increasing waiting lists.

"In the main, I think that the cuts will impact on the housing sector by continuing to hold back the property market in general. Repossessions are likely to rise some more next year, the waiting lists will go up and possibly up quite high for local authorities. Landlords will benefit from rising rents, new tenants will suffer increases in rents, while ‘established' tenants will probably be less affected as landlords prefer to keep them in a property rather than get someone else in just for a rise in rental income."