This year’s autumn budget was admittedly a little underwhelming for the real estate and lettings industries, but it wasn’t without its moments of interest. Here’s a breakdown of how Rishi Sunak’s plans affect the real estate sector, and what it may mean for agents and landlords around the country.
Affordable housing was on the agenda, as it often is. Rishi Sunak pledged a massive £11.5bn to be invested in affordable housing around the UK, with 65% of that fund dedicated to properties outside London.
Agents and landlords may benefit from keeping tabs on upcoming property development projects in their locality—affordable housing is an ongoing issue in the UK, so local house prices (and rents) may fluctuate as supply and demand shift.
Universal Credit Relaxation
Though not specifically aimed at the lettings industry, Sunak’s plans for universal credit will make interesting reading for landlords around the UK.
Households relying on Universal Credit now have a higher earnings cap before their payouts start tapering off. The Chancellor announced that claimants will now keep more of their benefits, retaining an extra eight pence (8p) of universal credit per £1 earned, meaning that they effectively take home 45p in every pound vs 37p currently.
Also, the ‘work allowance’ has been increased by £500 per year. This is the amount that households with children or someone with ‘limited capability’ for work can now earn more before their Universal Credit benefit starts tapering.
This is great news for cash-poor tenants around the country, as it essentially gives them extra disposable income at a time when the cost of living is rising—reducing their financial risk of falling into rent arrears or struggling to pay bills.
Amid the ongoing COP26 climate change conference, going green was a focus for the property industry as well.
The Chancellor repeated the government’s aim to completely decarbonise British houses by 2050. On the back of the government’s recent announcement that it will offer a heat pump grant (worth up to £5,000 of a potentially £18,000 purchase).
This move is a reminder to agents and landlords that you should pay close attention to the energy efficiency of your properties, especially given that a minimum “C-grade” EPC rating for rented properties comes into force in 2025.
Sunak proposed that the sale of gas boilers will be phased out by 2035 as the country moves in a “net zero” direction. This does, however, give landlords an opportunity to look at cheaper, renewable energy resources for their properties.
Interest Rates (and Mortgages)
The budget coincided quite closely with the upcoming meeting by the Monetary Policy Committee (MPC), which takes place on November 4th.
Rumours are rife that the UK is due an interest rate increase post-pandemic, to tackle inflation caused by the economic recovery.
Current inflation rates are reaching roughly 4%, while interest rates still sit at an historic low of 0.1%. If an interest rate increase happens as expected, buying and selling homes will become more difficult, at least while lenders adjust their rates and buyers assess their options.
As buy-to-let mortgages tend to be more expensive than regular mortgages, landlords looking to invest immediately after an interest rate increase will need more cash if they wish to secure a loan. Meanwhile, other landlords may look to sell if their mortgage repayments become too expensive, or increase their rents to cover mortgage costs.
Both scenarios will be difficult for tenants, as it means less affordable rental stock to choose from, compounding the current shortage.
This was a fairly undramatic budget for the lettings industry, but it put some important pieces in place for the next few years.
A strong focus on affordable, green housing shows the government’s vision for the industry—landlords who respond to the call for greener, safer homes will surely benefit in the long-term. Meanwhile, the main driver for the immediate future of the lettings industry is actually yet to be announced; a potential interest rate increase is where landlords and agents should cast their eyes in the next few days.