Cornerstone Tax Chairman David Hannah says government must now listen to property experts and industry stakeholders to solve the housing crisis or else it will continue to cause chaos for years to come.
New industry data by Rightmove earlier this week revealed that the British property market has soared to new heights, with the UK’s average asking house price in May reaching a record £375,131.
This surge has been driven by a pent-up demand for homes and a sustained level of borrowing rates, underscoring the challenges facing developers, buyers and renters in the current landscape.
The already significant undersupply of housing has been driven to chronic levels by the ‘triple whammy’ of anti-business tax policies, lack of affordable business finance and a planning system seemingly designed to prevent the country meeting its housing targets.
As the UK’s average asking prices of properties coming to market rose 0.8%, or £2,807, month on month, it highlights that the cost of buying a property and becoming a homeowner has never been more difficult for those looking to get onto the property ladder.
But despite the significant hurdles facing Brits, there is a glimmer of hope on the horizon, particularly for those trapped in the rental market.
The Bank of England has now strongly suggested a potential interest rate cut this summer, with Deputy Governor Ben Broadbent stating that it is possible now that the UK’s inflation figures have substantially decelerated. Such a policy change would ease the burden for renters caught in the perpetual cycle of escalating costs.
Gen Z? More like Gen Stuck!
Unfortunately, the reality for many renters remains grim as the struggles facing Gen Z turn them into Generation Stuck – individuals unable to break free from the rental market.
Our own national research shows that 42% fear they may never own a home, perpetuating these feelings of disillusionment and frustration, whilst nearly half of renters have lost hope of buying altogether.
The rental market itself is also undergoing seismic shifts as major affordability issues persist, exacerbated by bidding wars and soaring rental prices.
Nearly one in five (17%) tenants have lost out on rental properties due to these bidding wars whilst a similar amount (19%) has been forced to change rental accommodations multiple times in a short span.
The financial strain on renters is also palpable. Rental costs have surged by an average of 8.3% over the past year, outpacing the growth of newly let properties, with tenants typically paying £1,291 a month outside London and £2,633 in the capital.
This inflationary trend, coupled with landlords passing on increased expenses, has prompted 15% of buy-to-let landlords to exit the market altogether.
Moreover, regulatory hurdles have dissuaded 18% of potential buy-to-let landlords from entering the market, further constraining rental supply. This reluctance exacerbates the supply-demand imbalance, fuelling price hikes and bidding wars due to limited stock availability.
So is there any hope at all?
Amidst these challenges, recent indicators do provide small amounts optimism, such as speculated interest rate cuts.
However, uncertainties continue to run wild within the UK’s housing sector.
The government must urgently recognise the ever-pressing need for drastic changes to the housing market. Its decision to abolish Multiple Dwellings Relief (MDR) on the 1st of June is beyond counterproductive and will result in fewer new homes being built, with a significant drop in both domestic and overseas investment into housing delivery.
By removing a critical tax break such as MDR, the government is undermining the build to rent sector, which relies heavily on such incentives to maintain and expand the housing supply.
This policy decision will exacerbate the existing housing crisis, reducing the availability of new rental properties and driving up costs for tenants.
New policies need to promote affordability, accessibility and support for businesses building in Britain. The government must now listen to property firms and industry stakeholders to solve this vitally discouraging situation for Brits, otherwise this crisis will continue to cause chaos for years to come.
David Hannah is Group Chairman of Cornerstone Tax
