First, a look back
The Autumn Statement is one of two announcements that the UK Chancellor makes each year to Parliament, the other being the annual Budget, which was announced in March. This year’s Spring Budget confirmed the pre-announced Stamp Duty Land Tax surcharge for buy-to-let investors as well as changes to tax-free allowances. The government also committed to funding the high speed rail link between Manchester and Leeds (known as HS3) and the development of Crossrail 2 – two major infrastructure investments that will unlock significant new investment opportunities.
The impact of Brexit
As the dust settles after June’s shock vote, the apocalypse predicted by many hasn’t materialised. The pound dropped to 1985 levels but the stock market hasn’t crashed, property markets aren’t in chaos and foreign investors are still very interested in the UK. There is a climate of ‘business as usual’ but with added caution as businesses begin to understand the new terrain.
The UK residential market
According to data from the Royal Institution of Chartered Surveyors, who conduct a monthly survey of hundreds of estate agents for their views on the UK residential market, enquiries from new buyers are now at a level close to where they were in February, and the trend line since the vote in June has been steadily improving.
One of the major trends we are seeing following the referendum is increasing growth in the lettings market alongside that in the sales market.
One of the main reasons for this is the simple rule of supply and demand: the UK continues to add housing capacity at a rate far below what the government estimates is required. In 2015-16 for instance, 139,650 new housing units are expected to be completed in the UK, whereas the Department for Communities and Local Government puts the need at between 232,000 and 300,000 new units per year. Even if Brexit does have an impact on population growth, the gap between demand and supply is vast and we do not envisage it being bridged any time soon.
What to expect from the Autumn Statement
This will be Philip Hammond's first Autumn Statement since taking over from George Osborne as Chancellor. He’s said he may 'reset' Britain's fiscal policy depending on its post-Brexit performance, which is likely to be a core feature of the statement. But what might be announced that could affect property investors?
Aiming to achieve the government’s ambitious target of 1 million new homes by 2020, there may be more detail around the GBP3 billion Home Building Fund. This intends to "get Britain building" by offering cheap loans or financial guarantees to small- and medium-sized developers.
There might also be more information on the Housing White Paper, which aims to understand the barriers behind the government’s poor record of delivering new housing. This could support recommendations from the recent Lyons’ Housing Commission report, which looked at what the government should do to promote the building of new homes.
Some groups are also calling for increased measures to encourage urban regeneration and building on brownfield land.
Infrastructure investment could stimulate urban regeneration along major transport routes, such as Crossrail and High Speed 2. The government may raise money to fund investment programmes through “infrastructure bonds”, which could be matched by private investors and pension funds. There’s also a possibility of an “infrastructure bank” to fill the post-Brexit gap once access to the European Investment Bank is ended.
Buy to let restrictions
In an attempt to stem further property price growth, the government is tightening restrictions on the buy-to-let sector. Some of these measures have understandably been unpopular among the landlord community. The Autumn Statement may contain some good news for the sector, but this is not guaranteed.
With the Institute for Fiscal Studies predicting a GBP25 billion hole in the public finances needing to filled, there’s unlikely to be many Autumn Statement giveaways. However, the core of the UK property market remains attractive and creates short, medium and long-term opportunities for investors.
IP Global will be covering the Autumn Statement 2016 on Wednesday 23 November. Sign up to our Newsletter to receive our latest property market updates.