Budget 2023: Why Jeremy Hunt ‘missed a trick’ in ignoring the property market
Chancellor Jeremy Hunt dodged the opportunity to urgently boost housing supply and tackle double digit rising rents for young tenants in London, in a Spring Budget that was billed as helping Britons "everywhere".
Unusually, his address this week did not include any housing market announcements. Mr Hunt entirely failed to increase the much-needed supply of affordable, starter and family homes to buy or rent. In fact, he also omitted any mention of the Conservative Party’s 2019 manifesto pledge to build 300,000 new homes per year.
"The omission of housing policy is a dramatic shift from the budgets [and Autumn Statements] of 2018 and 2019 when housebuilding and home ownership were at the forefront of Government strategy and a vital part of the growth agenda," says Emily Williams, a research director at Savills.
This abandonment of the residential property agenda comes at a time when multi-bedroom houses in London have risen in value by 24 per cent since 2019 taking them to an average price of £873,390. Rents have jumped by 13.8 per cent in the 12 months to February 2023 (Hamptons), rendering life in the capital unaffordable for many.
"The housing market is a significant contributor to the economy, and it is hard not to feel the Chancellor missed a trick in failing to introduce any measures to stimulate activity," says Mark Harris, chief executive of mortgage broker SPF Private Clients.
Nimbyism and MP rebellions stifle home building
The cost of accommodation is yet another strand of the cost-of-living crisis but, unlike childcare costs and energy bills, one that has been ignored. The Office for Budget Responsibility, as referred to heavily in the Budget, has forecast that real disposable income will fall by 5.7 per cent by 2028, a record drop, making it even harder in London to cover rent and save for a deposit.
Williams attributes this inertia in homebuilding policy to Nimbyism. "Housebuilding has become very politically difficult to the Conservative Party," she says. "The leadership has faced lots of rebellions, especially from MPs in the Home Counties, whose constituents do not want to see more development. "However, I expected to see some support for increasing the supply of homes," she adds.
Nick Whitten, head of living research at JLL, accuses the Government of “perennially failing to build enough homes” and calls on them to improve the “overall food chain” of housebuilding.
There is a swell of noise from industry experts this afternoon disappointed by the lack of a replacement for the Help to Buy initiative. The Government’s shared equity scheme which started in 2013 ended in October 2022. As it wound down so too did the build rate of new homes, with housebuilders fearful they will not be able to sell all the stock they create.
“It is unhelpful that we have seen no new successor to Help to Buy or social housing funding," says Dominic Agace, CEO of Winkworth.
Tomer Aboody, director at property lender MT Finance, had hoped for some form of stamp duty relief for downsizers to help free up family-sized homes in the capital and to encourage more sales.
No help for tenants or landlords
Recent research from Hamptons revealed that small private landlords are leaving the sector at their highest rate in recent times, as the scrapping of interest rate relief quashed any remaining profits. Although rogue landlords need to be cast out, "we need to encourage the good ones to stay put or to join the industry," says Tom Bill, Knight Frank’s head of residential research.
The exodus of landlords from the market at a time when workers are returning to the office following the pandemic means there is little choice for tenants and has pushed up rents at an astonishing pace.
"Rental growth over 10 per cent is unheard of," says Williams. "In normal climes you would expect it to be two, three or four per cent," she adds.
“We wanted to see more from the Chancellor, particularly with regard to increasing supply of new homes to keep prices in check, as well as increased support to encourage new landlords and discourage others from leaving the sector,” says Jeremy Leaf, north London estate agent and former RICS chairman.
Will the economic outlook stoke the housing market?
The OBR adjusted its house price forecast for the country down by one per cent, estimating that values will fall across the land by 10 per cent and transactions will fall 20 per cent from their peak in the fourth quarter of 2022. At the same time Mr Hunt announced that the country would avoid a technical recession.
Perhaps the Conservatives are hedging their bets that falling sales and values will take the hysteria out of a housing market where prices have risen even during a pandemic.
“The Budget has certainly provided more of a boost for the UK housing market than the mini-Budget did,” says Bill. “The absence of a recession will lift sentiment as buyers and sellers adapt to the new reality of higher mortgage rates.
Harris agrees: "The inflation outlook is encouraging, which should help bring interest rates back down and continue to make mortgage pricing more palatable to borrowers," he says.