The Royal Institution of Chartered Surveyors (RICS) recently reported that activity in the UK housing market has ‘settled down’ after Brexit, with sales and prices expected to rise in coming months. RICS’ chief economist Simon Rubinsohn observed: “Sales expectations are beginning to edge upwards once again.”
Good news, then. Many times over recent months I’ve argued that the vote to leave the EU would have limited effect on house prices based on the tried-and-tested theory that supply doesn’t in any way match demand. This view seems to be holding up.
However, I do believe there are genuine concerns in the housing market specific to London that need to be addressed. Last week, housebuilder Berkeley Group criticised the government’s housing policy in the capital, warning it could damage the wider UK economy. “Government policy, which has been helpful outside London, has had a negative effect on the capital,” said Tony Pidgley, the group’s chief executive. “Transaction taxes are now too high and this is restricting both mobility in the second-hand market and the pace of supply and delivery of new homes in London and the South East.” Mr Pidgley concluded that London will fall well short of its targets for new homes.
According to Mr Pidgley, London is the ‘engine of our national economy’ and the principal driver of its fiscal revenues. However, its housing problems pose a risk to deficit reduction and the prosperity of the country as a whole. Development viability, Mr Pidgley said, was also threatened by ‘tension between the national policy on starter homes [new build properties sold at a 20% discount to first-time buyers] and the Mayor of London’s ambition to build more affordable housing’, as well as ‘the very high rates of the Community Infrastructure Levy adopted by local authorities’.
Berkley Group is not the only housebuilder to raise concerns. John Tutte, CEO of FTSE 250-listed house building firm Redrow agreed with Berkeley’s comments, adding that Stamp Duty hikes have ‘devastated’ the higher end of the housing market. He warned that it could have other damaging results. “It’s a ripple effect, if you don’t get new sites, you also don’t get any social new housing,” he chided.
Figures issued last week from the National House Building Council revealed that registrations of new builds in London have fallen 62% since the referendum, compared to the same period last year. Mr Tutte added that in the forthcoming Autumn Statement, he would love to see changes to Stamp Duty. “It’s a tax on mobility, and Britain is in a poorer place because of it,” he said.
I certainly have sympathy with these views. I’ve never been a great supporter of Stamp Duty and back in February I suggested there could be a more effective way for government to raise funds – perhaps by replacing it with a flat rate paid by both buyer and seller. While I can’t see Philip Hammond making any radical changes to this tax system when he presents his Autumn Statement on 23 November, if he is serious about including housing in his priorities, and getting anywhere near to building the targeted million homes by the end of the decade, he should listen to his key stakeholders: the housebuilders themselves.