In less than a month on 6th March, Jeremy Hunt, Chancellor of the Exchequer, will deliver the Spring Budget with an expectation from many, that he will announce measures such as tax cuts which will likely boost UK economic activity. One sector in urgent need of stimulus is of course house building, as once again the gap between new housing supply and increasing demand grows ever wider.
Recent data on the house-building and construction sector from the National House Building Council (NHBC), shows a dramatic decline in new home registrations during 2023 with a 44% decrease compared to 2022. Developers are also now more wary as registrations with ‘intent to build’ also fell significantly last year.
Given that the UK has seen a 1.25m population increase in net migration numbers in the last few years, the above data demonstrates just why the ‘housing crisis’ looks set to worsen. Rental demand has been growing and I have heard many anecdotes of late from landlords and others, about how fast rents and also finance costs have increased.
The increase in the cost of rental space is inevitably impacting the HMO market, where room rents in many cities and towns have seen significant increases for new tenancies as demand is so strong. Is this a market for everyone to pile into, now that the council tax banding issue has been resolved in favour of landlords?
I would say that depends on your appetite for taking on what is in effect a service business and which often needs far more regular attention than doing single lets.
Our lead article this month on page 14 highlights the demographic divide of wealth distribution between generations and anyone looking ahead for development opportunities should take careful note.
On page 18 you can learn more about an award-winning project in Ramsgate, which is a great example of how to succeed in property development, despite the many challenges which are evident in the current market. One of the key ‘take aways’ for me, was the emphasis on the developer’s long-term approach for their return on investment, on what was a ‘re-build to rent’ project.
You can also read similar views expressed by Adam Lawrence in his latest article on page 28, where he explains that on their deals nowadays, that they take a longer term view of the first ten years when holding a rental property asset. In my experience some landlords just think short-term, cutting corners with property refurbishments and then their customer tenants have to endure a series of inconvenient repairs which should have been addressed before the property was deemed as ‘ready to let’.
