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Quick fix or real solution? The 2013 Budget By: Richenda Oldham

"This is a budget for those who aspire to own their own home…it is a budget for our Aspiration Nation," said Chancellor George Osborne in his 2013 budget speech. He was of course referring to the Government's main initiative to energise the UK's sticky housing mark - Help to Buy.

Designed to encourage increased home ownership Help to Buy features two key schemes:

• An Equity Loan Scheme, enabling people to purchase a new build home with just a 5 per cent deposit and a 20 per cent interest free equity loan from the Government. The loans will be available to not just first-time buyers but to all house purchasers on new builds worth up to £600,000 and is to be repaid upon sale of the property.
• Help to Buy Mortgage Guarantee, providing mortgage guarantees on newly built homes or existing properties valued at £600,000 or less, but with a deposit of only 5 per cent of the purchase price - again this will be available to all house purchasers, but not until 1 January 2014.

The Help to Buy Equity Loan scheme is designed to support up to 74,000 home buyers and will provide £3.5 billion of investment, giving the UK's construction section a much needed boost. While the mortgage guarantee will support up to £130 billion high loan-to-value mortgages.

The government has also promised to reduce the number of houses needing to be built on green field by relaxing planning requirements on converting unused, unviable buildings into homes.

At this year's Ideal Home Show, housing minister Mark Prisk said: “With the budget we have looked to add investment in to the private rented sector and the affordable housing sector,  but also how we can help people struggling to get the deposits together to buy a new home.
“The point about Help-to-Buy’ is to make sure that home buyers and not just first time buyers are able to look at those properties that they simply can’t afford. It is a much larger scheme and a scheme that should lever in about £130 billion of mortgages in to the housing market. It could have the chance to kick start demand.”

Reaction from the property industry has been mixed - some have received the Government's plans with cautious optimism, while others believe that the proposed schemes fall a long way short of helping both the housing market and construction. There is a general feeling that the Government has sidestepped some crucial and rather obvious issues.
“If Help to buy has the desired effect, we anticipate it will boost levels of residential development in Bristol. In the short term the greatest benefit will felt by first time buyers, yet in the medium term we believe it will give confidence to developers to unlock new schemes, generating local employment,” said George Cardale, director of Savills’ new homes team in Bristol. 

Speeding up planning processes was all very well, said Ben Babington, director of residential development at Jackson-Stops & Staff, “But what the country really needs is an entire reform of its planning system. More sites need to be released for redevelopment and it is only the local planning authority’s ability and willingness to release this supply that can change this."
"Get on with it" is the view of Jeffrey Adams, Chief Executive of London developer and contractor United House. "The Chancellor needs to press fast forward on selling public sector land, easing planning restrictions and making it easier for developers to raise the funds to get building. Our first-time buyers will be middle-aged before we see any tangible increase in homes in the capital.”

Adam Lawrence, Chief Executive of developer London Square, thought that the Chancellor should study Monopoly economics to understand the housing sector. “Pass go, get £200, buy some land and build houses. Very simple. We need to see more land being freed up, developers getting support with project finance and buyers getting help to buy that first or second home.”

According to Simon Rubinsohn, Chief Economist of the Royal Institution of Chartered Surveyors, the Chancellor's statement was lacklustre and would do little to deliver much for the economy in the short term. “Our members have told us repeatedly that the success of infrastructure projects is about delivery on the ground. The Government has largely failed to realise that infrastructure projects don’t need to be big to be effective in creating growth. In fact small might very well be beautiful.  Across the regions and the nations it’s the smaller repair, maintenance and upgrade projects which can be picked up by medium and small construction businesses. Rail maintenance and school refurbishment are just two areas where a small amount of capital investment would quickly deliver great benefits."   

Business Rates and empty rates relief were two pressing issues that Peter Chapman, head of rating and compensation for Cluttons, would have liked addressed. “This Budget provided the Chancellor with a golden opportunity to demonstrate that the government was listening to the retail industry’s pleas and it is disappointing business rates were not addressed. Instead, the government has refused to listen to the concerns of the retail industry which called for no increase to business rates next year.
“Secondly, why did the Government not take the opportunity to expand the empty rates relief? This would have encouraged investment and development of existing redundant buildings and demonstrated the government’s commitment to growth and employment.”

David Ramsay, planning associate at Vail Williams questioned the ambiguity over investing in a further 15,000 affordable homes while allowing social housing tenants more opportunity to buy their own homes and thereby potentially reducing social housing stock. "It’s unclear what the net effect will be on addressing the overall social housing need. The Budget contained little stimulus to speed up the planning system. Despite previous rhetoric around planning, the Chancellor/Government has missed a real opportunity here and has not added anything to make it any easier or quicker to secure consent.”

Chris Selway, Director at BNP Paribas Real Estate, believes that brownfield sites and development land should be opened to boost the economy via construction and regeneration in urban areas. Vast tracts of potential housing land remain dormant as the rising cost of good road access, bridges and drainage solutions are no longer off-set by pre-recession record land values.”

The 2013 Budget has failed to provide the stimulus for construction that will be needed to deal with the country’s housing crisis and support the beleaguered construction industry, said Angela Brady, President of the Royal Institute of British Architects (RIBA). “The UK is in the grip of the worst housing crisis for decades, yet committing to building only a tiny proportion of the 300,000* new homes that are needed each year to meet demand. The private sector has only ever delivered around 150,000 homes a year, so while Help to Buy will enable greater access to mortgage finance, it does not sufficiently address the root cause of the housing crisis: we are not building enough homes.
"What about resources for regional LEPs?" asked Jan Thompson, Jones Lang LaSalle's Birmingham-based Midlands chairman. "The budget contained no news on how the government would allocate resources to regional LEPs through the Heseltine Review. Until this is decided, the LEPs for Greater Birmingham & Solihull, and for the Black Country remain uncertain about when they can begin to implement their ideas for growth and make them a reality. If you put this into context, last month, of the 576 infrastructure projects highlighted by the government only seven have been completed. The country needs these schemes to be delivered and not log-jammed inside Whitehall.”

Mat Lown, Head of Sustainability at Tuffin Ferraby Taylor, thought that if town centres are to survive, the property sector must take the lead. "It is not just a question of how to regenerate the high street to save a town's retail offer or addressing the challenges of internet shopping, it's about how we build sustainable communities and how we adapt the fabric of our towns to suit those communities.  Converting properties into residential could help rejuvenate our struggling town centres and provides an opportunity to address the pressing need to improve the energy efficiency of existing buildings. It also helps the UK Government meet its objective to alleviate an urgent demand for housing. Perhaps it’s time for the Chancellor to revisit a relaxation in VAT for works to existing buildings?”

Features April 2013

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