Boris and Brexit: housing bounce or humdrum buffoonery? July 2019
01/08/2019
148
6 min read
The mainstream news has understandably been taken up with Boris Johnson's becoming Prime Minister after a protracted campaign and against a backdrop of continuing Brexit uncertainty.
It's been highly expected that Mr Johnson would have pronouncements to make on housing – let's not forget after all that perhaps two years ago his predecessor vowed to take personal responsibility for the ongoing UK housing crisis (remember how that went?) – and an abundance of ideas has disseminated from No 10 already.
Johnson – the luxury riverside flat-building mayor
Opinion is divided over Johnson's previous form with any sort of housing brief; as London's Mayor he certainly ensured some houses were built, but with a bent towards (now mainly empty) riverside luxury blocks. Affordable wasn't a priority. He notably attempted to build some bridges though some projects achieved nothing more than ignominy (garden bridges anyone?).
Boris Johnson's Housing Brainwaves
Because this portal is devoted to all things housing, we'll leave aside wider Brexit considerations which do not directly concern this subject.
So far, suggestions, half-statements and even rumours which have emanated from Mr Johnson's campaign for leadership and now from No 10 Downing Street itself have included:
- Stamp duty could be halved for all homes worth more than £500,000 to make it easier for pensioners to sell larger homes and make room for growing families: this has been dubbed the last time buyer exemption by some witty scribes.
- Stamp duty could be scrapped on all homes under £500,000, full stop.
- These stamp duty incentives and other related housing spending could be covered by new taxes on non-UK resident buyers, vacant homes and people buying second homes.
- There's even a suggestion that stamp duty could be abolished altogether, the cost would be £5.1 billion.
- One other ruse floated is to make sellers pay stamp duty not buyers…however this would most likely result in sellers factoring in the tax into selling prices thus fuelling house price inflation.
- Increasing the number of purpose-built homes for older people – on the face of it, this has much merit given some of the arguments made about shortages of appropriate properties for expanding families etc., funding once again would remain a challenge.
- Johnson also appears to endorse the prioritisation of brownfield redevelopment…however this runs somewhat counter to his plans to create 15 new ‘millennial towns’ along major transport routes out of London, which would inevitably need to be built on greenfield land.
Perhaps the problem with the magic money tree is that only Mr Johnson knew where to find it…
Additionally in terms of increasing funding for some of the more grandiose measures mentioned there has been noising of increasing stamp duty and other tax for non-UK residents, second home buyers and property investors – who have been crowding out owner occupiers and first time buyers. But the contradiction is clear here – these are many of the Conservative Party's traditional supporters and backers.
We would suggest, whatever eventually comes forward, that housing supply is that old elephant in the room which seems to have taken up permanent residency. Add to that the highly questionable targeting of actual incentives – most experts have taken the view that 6 out of 10 Help to Buy users didn't actually require Government help to buy a home on the open market – and optimism remains thin on the ground.
Finally, with a growing shortage of building construction workers as many EU citizens leave before an increasingly likely Brexit on October 31, the actual ability to rebalance the housing market is likely to become more difficult.
England and Wales
Average house prices in England & Wales can best be described as being in a plateau: at £240,810, this represents no movement month-on-month along with a 1.1% year-on-year rise which is the lowest since April 2012.
Sales volumes in England & Wales have actually risen month-on-month for the 2nd month in a row…but at 61,965 for April that's still just under 10,000 below December 2018's 71,253 which itself was hardly notable.
Boris's Jedi Force: weak in the capital
Those positive housing waves are clearly less-than-impressive in Prime Minister Johnson's immediate hinterland from No 10 Downing Street: London's average price of £457,471 represented a 2.6% month-on –month fall and a considerably larger 4.4% fall year-on-year, and this for the 15th month in a row..
Sales volumes in the Metropolis actually rose 8.1% month-on-month to 5,947 but year-on-year, the dire fact is that volumes have fallen in 17 out of the last 19 months.
Cost of living – steadily rising of late
The consumer price index has stayed level over the last month while weekly wages, at £536 on average, are at their highest level ever, which is good news in terms of overall spending power and much needed given the snail's speed with which the UK has recovered from the last recession.
NAEA: demand drops marginally but prospective buyers remain high
The National Association of Estate Agents (NAEA), in its most recent housing market update - for June - noted that house hunters registered per branch fell in June to 307 from May's 305.
Year-on-year, demand almost aligned with this - in June 2018 there were 308 registered house hunters per branch.
Housing supply decreases
The number of houses available per branch decreased in June to 41 from May, when there was 37. Year-on-year, supply was down marginally, with 39 properties available to buy in June 2018. There were 9 sales agreed per branch in June, the same as for May and the same as for June 2018.
Sales to First Time Buyers dropping
Sadly sales to first time buyers decreased in June, with 26% of all sales being sold to this cohort in May compared to only 23% in June.
But, to finish with our seemingly unchanging news finale - "and finally....(!)" some 86% of properties sold for less than asking price in June. Some metrics are as resistant to change as granite is to weathering!
Andrew Boast, co-founder of SAM Conveyancing, said:
"The rise of Mr Boris Johnson to Prime Minister of the UK coincides with the Brexit endgame. Unfortunately there's still nothing but uncertainty in the air, however."
"It isn't that there's a shortage of ideas and pronouncements accompanying the change of leadership - quite the opposite - but gaudy slogans and flashy soundbites with barely any detail are not the panacea for a country which has thrived on the thinnest of housing market certainty for so long."
"And it isn't even clear whether Mr Johnson can actually do any further Brexit negotiating within the established rules and timeframes."
"Given these factors our optimism for the housing market in this month, already one when sales are traditionally lower than normal, are far worse than normal. There's no guarantee that anything promised on a macro-level can be delivered so what's the hope of a successful and improved stampd duty environment for example?"
"Cynically, there is obviously a bargain or two or more to be had in housing in these febrile times, but any sane person would trade this in a heartbeat for business certainty and a clearly mapped political pathway for the next year or so."
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