Housing takes centre stage during manifesto launch week
Making sense of the latest trends in property and economics from around the globe
5 minutes to read
We've known for nearly a year that housing would play a central role in this election but it's only now, during the week that both main parties publish their manifestos, that we're getting a real sense of how much policy could change during the next parliament.
Labour is seeking to dominate the issue. It has a very significant polling lead among young people, for whom housing consistently polls as a critical issue. The party will launch its manifesto tomorrow, but we've had a steady drip feed of its policy intentions for weeks - we've been compiling them here. The Conservative Party responded this week with a promise to revive Help to Buy. This is a £1 billion scheme would include government guarantees for borrowers with a 5% deposit, allowing purchases of homes up to £400,000.
The parties intend to take different routes to the same destination. Labour and the Conservatives have each pledged to build a respective 1.5 and 1.6 million homes over the course of the parliament. How realistic is that? Not very, according to Knight Frank's Oliver Knight. Planning permissions for new homes across England dropped to their lowest level for almost a decade over the 12 months to Q1, according to new figures from the Home Builders Federation. Just 236,644 units were granted consent, way below what will be needed, especially given a portion of these consents will never be built out.
Boiling the ocean
Labour has a large polling lead, so its pledges on housing are getting the lion's share of the scrutiny from journalists. So far, the party's pledges feel 'bitty' - they swing from the boldness of new towns and green belt reviews and follow up with soothing promises of tree-lines streets filled with Edwardian mansions, illustrating how divided the nation is on the issue. This strategy looks intentional - see the party's briefings to FT reporters this morning:
"Insiders say its strategy on housing is to bring together multiple strands of policy to have a material impact on the current situation. “It requires several quite tricky things to all come together — strategic planning reform, implementing changes to compulsory purchase orders, the integration of transport with housing policy and greenbelt land release all working in concert to increase output,” says a person familiar with the party’s thinking."
That piece, which explores whether Labour can break the UK's planning deadlock, is well worth reading for the input from Rob Perrins of Berkeley Group, Mark Allan of Landsec and Clare Miller of Clarion. They echo much of what we saw in the HBF's blueprint for government, see Friday's note, in calling mostly for fairly straight forward changes, rather than an overhaul that would inevitably get bogged down in parliament. Think proper staffing at local authorities, sensible policies on density near transport hubs, and a smaller list of reasons to say 'no' to development:
“If step one is a full root and branch review of planning, then we’re still going to be talking about it after the next election,” Mr Allan tells the paper. If the government sets out to “boil the ocean” then there will be scant progress, he adds.
Prime London
Activity in prime London sales markets has cooled as the election draws nearer. The number of offers made above £5 million was 22% below the five-year average in April and May (excluding 2020), which compares to a decline of 9% below £5 million. There was a 4% increase in the number of new prospective buyers registering below £5 million but a 7% fall above that figure.
Uncertainty over the future of the UK's non dom policy is likely having an impact.
I've written a lot recently about the state of the public finances and questions as to how both parties will fund their manifestos. Whether Labour will be able to raise its stated £2.6 billion by changing the non dom rules will be scrutinised on the other side of the vote. Labour officials appear happy to let business know that its proposals are yet to be finalised:
“Having spoken to a senior Labour figure, my sense is they don’t want to scare wealthy individuals away from the UK,” James Quarmby, a partner in the private wealth team at law firm Stephenson Harwood tells Tom Bill in the update linked above. “Irrespective of what politicians say during an election campaign, being in government is completely different and I expect a Labour government to proceed with caution. There will be scope to finesse the non dom legislation so that it broadly meets their campaign promises, but at the same time remains business-friendly."
You can see the latest from Tom on prime lettings markets here.
Signs of strain
Figures released in the past 24 hours covering employment and mortgage arrears show real signs of economic strain. Vacancies and employment are down and the unemployment rate has risen to 4.4%. However, pay is still climbing at an annual rate of 5.9%, so there's not enough in the figures to increase the chances that the Bank of England will opt to cut rates during the summer.
Meanwhile, the value of outstanding mortgage balances with arrears surged 44.5% in Q1 compared to the same period a year earlier, according to the Bank of England. While that is alarming, the proportion of total loan balances with arrears remains at a very manageable 1.28%.
In other news...
Twenty years ago, the UK’s top 200 shopping centres were predominantly owned by institutions and what are now Real Estate Investment Trusts (REITs, then Property Companies). Through two decades of underperformance, this has now changed. What was once an institutional sector has given way to a more varied pool of buyers, encompassing a mix of Private Equity, Property Company and Private Investor ownership.
Stephen Springham covers "the paradigm shift" in shopping centre ownership.
Elsewhere - John Lewis launches legal challenge to force through tower block plans (Telegraph), and finally, companies tempt senior lawyers to the office with huge salaries (Times).