Autumn Statement 2023: what it means for UK property market

Yesterday Jeremy Hunt announced a raft of measures designed to give a much needed boost the the UK property market that has been met with a number of obstacles in 2023.

Successive interest rate rises and cost of living pressures weighing heavily on household budgets have impacted the UK housing market significantly this year.

Here we take a dive deep into the implications of the Autumn Statement on the UK property market, examining what the measures, or lack thereof, announced yesterday mean for new homes, emission targets and unleashing housebuilding. 

UK housing market

The government has successfully halved inflation, chancellor Jeremy Hunt said in his Autumn Statement yesterday.

It will also unlock tens of thousands of new homes by investing in the planning system, he added in his hour-long address to Parliament.

Both appear to be good news for the UK housing market but the government’s role in delivering either is debatable.

The fall in inflation was inevitable as global energy prices dropped and we have previously questioned the logic of reforming the planning system to unleash waves of housebuilding.

It’s an awkward truth for politicians who are elected to fix things, but housing delivery is more closely tied to economic than political cycles.

Housebuilders have cut jobs in recent months and the number of projects granted planning permission in Q2 fell to the lowest level since records began in 2006. This was due to falling demand and higher mortgage rates more than the planning system.

Tougher water pollution rules are also a problem for developers but, in such a demand-led market, will mitigating them “unlock 40,000 homes over the next five years” as Hunt suggested this week?

As the general election approaches, expect politicians to ignore such nuances in favour of more easily-digestible soundbites.

A day before the Autumn Statement, the Home Builders Federation published a ten-point plan called Firmer Foundations, designed to increase housing supply. It suggested using a percentage uplift method for growing housing stock within a local authority rather than the more intangible method of household projections.

“It might not look like it, but this document could mark a fundamental shift in future policy debates in reference to housing,” said Philip Barnes, group land director at Barratt, on LinkedIn.

Overall, the Autumn Statement was short on eye-catching measures for the UK housing market. Many hope they will come in 2024 and there will inevitably be speculation mixed with a healthy dose of wishful thinking around a stamp duty cut.

The Chancellor did extend the mortgage guarantee scheme, which sends a positive message to borrowers without being transformational, and he earmarked £3 million to improve the home buying process through greater digitisation.

The Autumn Statement also included a proposal to make splitting a house into two flats easier under the planning system. On the basis that two flats are generally worth more than one house, could this be the first bit of good news for landlords in a while?

New homes

The key pledges encompassed planning applications, nutrient neutral housing development, new urban quarters across three cities and a new Permitted Development right.

On the first point, the chancellor said he would reform the planning system to allow local authorities to “recover the full costs of major business planning applications in return for being required to meet guaranteed faster timelines”.

If they fail to meet the timelines, their fees will be refunded automatically with the applications being processed “free of charge”.

The term ‘business’ planning application is ambiguous but could include all applicants who are a business including housebuilders, but not households.

The other announcements were also light on detail. In total, the government has earmarked £592 million towards new housing development. This includes delivering high quality nutrient mitigated housing schemes (£110m), unblocking planning to develop new housing quarters in Cambridge, London and Leeds (£32m) and topping up the Local Authority Housing Fund (£450m).

On top of this, the chancellor has announced an additional £3bn in funding for housing associations under the Affordable Homes Guarantee Scheme. He said this will help the scheme deliver 20,000 new homes, as well as improve the quality and efficiency of “thousands more”.

It remains to be seen what impact this will have in terms of housing delivery and how successful the government is in unlocking nutrient neutral schemes.

Finally, the new Permitted Development (PD) right to allow any house to be converted into two flats was a surprise development but could be seen as attractive for property owners as an investment opportunity and provide a chance for older residents to downsize while staying in their communities.

Green energy 

The chancellor's announcement of grid and connection improvement plans which will "cut grid access delays by 90% and offer up to £10,000 off electricity bills over 10 years for those living closest to new transmission infrastructure," is welcome news. 

The £4.5bn of support announced over the five years to 2030 to attract investment into strategic advanced manufacturing and green energy sector is another step in the right direction and signals a commitment to net zero. This, combined with improvements to the grid connection process, will hopefully drive the investment in renewable energy. Which, in turn, will help to decarbonise the electricity grid, a vital step in lowering operational emissions from buildings, where they are fully electrified. However, it is noted that the level is around 1% of the US' Inflation Reduction Act.

There were omissions however in terms of energy efficiency of buildings, despite the mooted partial stamp duty rebate for new homeowners who make their properties more energy efficient within two years. The energy efficiency of UK homes is such a big part of the net zero puzzle.

Stamp duty measures have been pointed to as a potential impactful lever because it impacts at the point of purchase – a time when renovation often takes place. This measure had explicitly been put forward within the UKGBC's 'Mission Retrofit' report. This could be a missed opportunity to provide more of a 'carrot’ rather than ‘stick’ approach for homeowners.

Another missing component was any news on the implementation of more stringent Minimum Energy Efficiency Standards for non-domestic buildings, having scrapped measures for the private rented sector in September. In the 2021 consultation it had originally been mooted that in 2027 and 2030 the minimum EPC required for a non-domestic building to be let would be raised from EPC E currently to C and B, respectively.

However, last month in the government's response to the Climate Change Committee report, they noted that "the proposed timelines within the original consultation will require updating to allow sufficient lead in time for landlords and the supply chain." Meaning the dates are likely to be pushed back but they are said to "be publishing in due course" the detail. As ever, clarity is needed for owners and occupiers.

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