What Can We Expect from the New Housing Secretary Simon Clarke?

As the dust settles on (another) Tory Leadership contest and Liz Truss emerges victorious, attention turns to the new cabinet. And amongst the high-profile demotions and political musical chairs, we have a new housing secretary – the fourth this year.

Taking the hot seat is Teeside MP, Simon Clarke, replacing Greg Clark (confusing, eh?) who lasted just two months in the role. Mr Clarke has been named, Secretary of State for Levelling Up, Housing and Communities. Typically, we’d expect a specialist Housing Minister to be appointed alongside Mr Clarke but, as of yet, it’s unclear whether that role will continue to exist.

But who is Simon Clarke? And, most importantly, what can conveyancers and the housing market expect from him?

Who Is Simon Clarke? 

Hailing from Warwickshire, Clarke stood in the 2015 general election as the Conservative candidate for Middlesbrough South and East Cleveland, eventually losing to then Labour MP Tom Blenkinsop. But he returned victorious in the fateful 2017 general election, winning the seat from Labour. 

Since then, Clarke has had stints as Exchequer Secretary to the Treasury and Minister for Regional Growth and Local Government. As part of the 2021 September Reshuffle, Mr Clarke became the youngest cabinet minister in government after being appointed Chief Secretary to the Treasury.

So, despite his relatively young age for politics, just 37, in Clarke we appear to be getting an experienced operator. It’s also important to note he has some experience in the housing sector, serving in the Ministry of Housing, Communities and Local Government in 2020.

But what about his politics, in particular towards housing? Well, Clarke has been a vocal supporter of regeneration projects in the North East. In May of 2022, he tweeted it would be a “disaster for the Conservatives” if “we do not build the homes we need, where we need them”. 

Unusually for a Conservative, Clarke has also been very outspoken on climate change. He’s spoken out against fellow Conservatives who’ve claimed that net-zero should be placed on the back burner due to the energy crisis, going so far as to describe it as “positively irrational.”

What Can Conveyancers Expect?

We’ve established that Simon Clarke has principles and at least some background in housing, but what does any of this mean for the housing sector?

First, let’s deal with some positives. Clarke’s outspoken support of ‘levelling-up’ could be a boost to the country’s flagging new-build programme. In rhetoric at least, Clarke has proven himself a staunch supporter of building more houses, particularly in those areas in most desperate need. This can only be good for the housing market, given its difficulties in matching supply with demand – particularly for first-time buyers. 

On top of this, his backing of net zero is interesting. It’s no secret that the UK’s housing stock is woefully insulated, which is bad in more stable times but potentially disastrous in an energy crisis. What’s more, terrible EPC ratings devalue plenty of otherwise decent housing stock. It’s clear something needs to be done; could Clarke be the man to do it?

Now for some slightly more downbeat predictions. Unfortunately, Clarke has one of the most daunting in-trays of any government minister. Alongside the problems with homebuilding, he also faces a rampant homelessness crisis and a rental sector on its knees. It remains to be seen how much space this leaves for an ambitious homebuilding or insulation project.

Then we have the views of Prime Minister, Liz Truss. Truss has repeatedly expressed an ideological distaste for “Soviet top-down housing targets.” It’s not completely clear what that means yet and it’s probably worth treating it more as red meat for the Tory base rather than a cast iron proclamation. Nevertheless, we can probably assume that the government’s target of building 300,000 homes per year by 2025 is likely to be altered, if not scrapped.

So, what can we conclude? Well, for all his principles, Clarke is still a member of what looks to be one of the most ideologically committed governments in a generation, beset by crisis. So the smart money is on housebuilding ticking along at much the same level it has done for much of the last decade. It’s not what the housing market needs but for the time being, at least, don’t expect radical change. 


Demand for Housing Is Falling, What Does It Mean?

Has the dreaded slowdown begun? If we’re going by demand figures then, surely, the answer is yes. However, at the same time, prices look relatively stable. Confused? You have every right to be. Let’s take a look at what’s going on. 

What’s Happening? 

Starting things off, July and August have seen a slackening in demand. Sales expectations for the coming 12 months have fallen by 36%, down further from the 21% drop in June, according to a survey from the Royal Institution of Chartered Surveyors (RICS). This comes in the wake of the Bank of England (BoE) announcing its steepest rate hike since the mid-1990s. 

According to RICS’s report’, “This marks the third successive report in which this indicator has been in negative territory, thereby representing the longest stretch of falling demand seen since the early stages of the pandemic.”

Alongside this, August has seen a small drop in the average house price for the first time this year. Figures just released by Rightmove reveal prices have dropped by 1.3% or £4,795 so far in August. 

But that’s not the whole story.

The RICS survey also reveals that the overall trend (aside from the August blip) is still towards rising house prices. And, according to research, fall-throughs are not rising dramatically – something you would expect if the market was about to come screeching to a halt.

What Does This Mean?


This all seems a little contradictory on the face of it, so what can we learn?

Well, first of all, the cost of living crisis and higher interest rates are having an impact on the housing market. Demand has slowed. And half of estate agents report that average selling prices are no longer coming in above the asking price for properties worth up to £500k. Meanwhile, many sellers with properties worth more than £1m are being forced to accept lower offers. It is worth noting, however, that the fall in demand predates the BoE’s interest rate hike. 

What about house prices? Well, given it’s such a small drop, the 1.3% fall in prices this month can probably just be attributed to the time of year. August has always been a slow time for the property market; most of us are on a beach somewhere for at least some of the month. So, both buyers and sellers simply put things off until early autumn.

As for projections about prices continuing to rise, it’s the same old story. There is still a huge imbalance between demand for new homes and housing stock. Unsurprisingly, the UK’s crippling shortage of new housing stock hasn’t gotten better with the onset of a cost of living crisis and a possible recession. This means that, while buyer demand has been falling for the past three months, it’s well above where the market was as recently as 2019. 

What Does the Future Hold?

A good way to gauge where the housing market is headed is to look at what the industry’s big players are saying. Generally, if they sound particularly alarmed, we should be too. However, most of the housing heavyweights seem remarkably sanguine about what’s happening, if not downright chipper.

Lloyds Banking Group (owner of Halifax) said last month that it was bracing itself for a slowdown but was still expecting lending to grow by single digits in the next 12-18 months. This sentiment is echoed by Right Move, which still expects UK house prices to end 2022  7% up on 2021. 

Knight Frank also believes that prices will remain relatively stable throughout the rest of 2022, despite a slight cooling off later in the autumn as holidaymakers return and put their houses on the market, stimulating supply. And even RICS, the author of the report on falling demand thinks that, even with a slight loss of momentum due to economic pressures, prices will be ‘modestly higher’ than current levels in 2023. 

All in all, while the next 12 months are unlikely to represent sunlit uplands, they also don’t look so bad. As long as supply remains incredibly low, house prices are likely to remain high, even with what promises to be a long, hard winter around the corner. 

Of course, we could all be proven wrong. After all, it’s happened before (most notably in 2008) and trying to predict the impacts of an economic crisis is usually unwise. But, for now, it looks as though the housing market is one of the few sectors of the British economy set to have a stable end to 2022. 


What Would a Recession Mean For the UK Housing Market?

Economic storm clouds gather on the horizon. The unions are back on strike. And the Bank of England (BoE) predicts inflation will soar to 10% by the end of the year, a huge decline in real incomes, and a rise in unemployment.

It all feels very familiar. After all, we’ve been here before in 2008, 1980, and 1973. It’s often fruitless to compare crises; 2022 is not 1973, no matter what the tabloids might say, the socio-economic conditions are very different. However, when it comes to the housing market, past economic slowdowns can be instructive in what to expect this time around.

But first, let’s deal with whether a recession really is inevitable.

Is There a Recession Coming?

Well, the good news is that the BoE is yet to announce that the UK is in a recession. However, that’s about where the good stuff stops. The UK is currently in a period of ‘stagflation’, a term that brings economists and financiers everywhere out in a cold sweat. 

Typically, when a country gets locked into a period of low growth and high inflation or ‘stagflation’ (as the UK is) the only way out is a recession. This can be a long, hard recession like 2008 or a relatively short one a la April to June 2020 but the rule of thumb is that some sort of economic slowdown must follow.

And the figures aren’t promising. Consultancy KPMG predicts that GDP growth will more than half this year, with further decreases in 2023. This is also backed by the figures coming out of the Office for national statistics, which show decreases in GDP for March and April. When you consider that the definition of a recession is ‘two successive quarters of decline in GDP’ this is already edging towards that territory. 

How Bad Will the Recession Be?

While there’s a broad consensus among economists that a recession or, at least something that feels very much like one, is coming, as yet, there’s no agreement on how bad it’s likely to be. 

Some experts, such as KPMG, are predicting a mild recession. The BoE is clinging to the technical definition and stating two consecutive quarters of decline are unlikely. Meanwhile, the CEBR is suggesting that we could see a ‘widespread recession’.


Whatever happens, it now seems near-certain that we’re headed for a major economic slowdown, so what does that mean for housing?

What Will Happen to the Housing Market?

First of all, let’s tackle the obvious. Higher bills for energy, goods and services, as well as interest rises (both from the BoE and mortgage lenders), are likely to act as a brake on housing market growth. 

It’s a simple question of buyers having less money in their pockets. The growth of recent years has largely been driven by incentives for buyers, be that low-interest rates or the stamp duty holiday. If the inverse is true, (rising interest rates, falling incomes and plenty of other disincentives) many who would have entered the market will either hold off in the hope better deals will be available in future or simply be priced out.

A recession could also put a dent in house prices themselves. Research from Risk Concern, reveals that, when adjusted for inflation, the average impact on house prices across the last six recessions is -9.22%. That might not sound like much when house prices in the UK have risen by 53% in the last decade, but it’s still a hell of a drop.

All that being said, there are a few nuggets of good news to cling to. Firstly, no economist has predicted an outright crash. It’s worth remembering that despite the doom and gloom, we’re some way from a 2008-style scenario. Alongside this, mortgage approvals remain well above pre-pandemic levels, indicating that plenty of people still have the motivation to move. And, we’re still in a period where the labour market is reasonably strong, with unemployment low and vacancies high.

In conclusion, were we unwise enough to predict the next year of the housing market, we’d probably opt for a slight slowdown, with a single-digit percentage fall in prices. Less first-time buyers will enter the market and fewer owners will opt to upgrade but the market should remain steady. However, this does come with a caveat. Given the last few years we’ve lived through, it’s probably wise to take these predictions with a healthy pinch of salt.


Is Right to Buy About to Make a Comeback?

Assuming you remember the 1980s, what defined the decade for you? The music? The
fashion? The miners’ strike? If you’re a Conservative MP, chances are, it’s none of the above.
No, for many in British politics, the defining moment of the decade was Margaret Thatcher’s
Right to Buy policy. So much so, that there have been multiple attempts to revive it in one form
or another. Who remembers Michael Howard’s manifesto commitment in 2005? Or David
Cameron’s pitch for his 2015 election bid? Or Robert Jenrick in 2019?
So it comes as no surprise that Boris Johnson has become the latest Conservative politician to
hitch his wagon to this particular star. It was announced in early May that the Prime Minister is
considering reviving the scheme to allow housing association tenants to purchase the properties
they rent at a discounted price.
Under the proposed scheme, 2.5 million households would be eligible for discounts of up to
70% on their rental properties. But will it happen this time? Is it a good idea? And what would it
mean for conveyancers?
Will It Happen?
As we’ve already covered, this isn’t the first time the scheme has arisen from the dead. So
what’s different this time?
Well, it’s no secret that Boris Johnson is in desperate need of a vote-winning policy in the wake
of partygate and the ongoing cost of living crisis. Likewise, the Tory party could do with some
good old fashioned conservative policies to burnish its credentials with an unhappy electorate.
These factors alone make it an attractive option for both Johnson and the party.
However, given the timing of the announcement, it’s entirely possible that this is little more than
a political ‘dead cat’ to distract from other issues. Time will tell.
Is It a Good Idea?
Laying all that to one side for a moment, say this was to happen, would it be a good thing?
Let’s take a look at the good bits first. First of all, as we mentioned, this scheme would mean as
many as 2.5 million homes entering the market over its duration (although the real figure will be
far smaller than that). This would obviously be a real shot in the arm for the housing market.
It would also mean many people who are currently shut out of the housing market could gain a
foothold (much like the original scheme). Although low on details (quelle surprise) the
Government’s proposal did suggest that housing benefit could be used by would-be purchasers

to help secure a mortgage. That detail, at least, is laudable.
Now, we have to deal with the bad. Top of the list is how eye-wateringly expensive the scheme
would be, with some estimates putting the cost at £14bn over 10 years.
In addition, the new scheme suffers from many of the same problems as the original. The 1980s
version proved that it’s virtually impossible to replace housing stock one-for-one. Private
developers have little incentive to build social housing and local authorities (who were entrusted
with replacing it the first time around) whose resources are stretched and are legally required to
spend their budgets elsewhere.
And, so we end up with an even greater deficit of social housing for the neediest in our
communities. It’s less than ideal when the waiting list for local authority provided social housing
already stands at 1.16 million households.
Very little appears to have been proposed for how these problems will be countered or how the
scheme will ensure we aren’t in the same (or a worse) position in twenty years’ time.
Lastly, the scheme claims to tackle generation rent. Unfortunately, this strategy has a glaring
error. Although social housing still makes up a sizeable portion of the housing sector (around
18%) it isn’t how the majority of renters, particularly the younger people the phrase generation
rent was coined for, live.
The private rental market generally hovers around 20% of all households occupied, closer to
30% in London. That’s a huge swathe of potential homeowners and, if we’re being cynical,
voters for whom this scheme does nothing.
What would it mean for conveyancers?
Now we’ve tackled the benefits and drawbacks, what would the revival of the scheme mean for
conveyancers?
In the short term, it would potentially lead to a spike in the number of new houses coming onto
the market. Of course, more work is generally a good thing for conveyancers, even more so if
it’s stimulating the lower end of the market and adding new homeowners to the ladder.
However, this will be little more than a short term blip if the problems of the earlier right to buy
scheme aren’t tackled. Or, to put it another way, the result will only be positive if it is matched by
an increase in the size of the housing market to match the ever-growing need.
Anything other than this just risks shifting demand to another part of the market and the
shortage continuing ad infinitum.


How Much Longer Can House Prices Continue to Rise?

How much longer can house prices continue to rise?’ Whether you’re a first-time buyer
desperately trying to gain a foothold on the ladder, a longtime homeowner thinking of selling up,
or just a conveyancer, it’s the question on everyone’s mind.
House prices just keep on growing. New data from Halifax reveals February saw the fastest
growth in prices since June 2007 – an era that feels very distant in so many ways. Meanwhile,
according to data from Rightmove, the average cost of a house in the UK now stands at
£354,654, the first time it’s ever exceeded £350,000.
So it’s clear that records are being broken and ceilings smashed month on month. But what’s
behind the precipitous rise? And, perhaps more importantly, what could end it?
What’s Driving the Rise?
There are several interweaving factors contributing to soaring prices. And, depending on which
expert you ask, you’re likely to get a different answer as to which is the most important. So, let’s
take each in turn, starting with the simplest.
First up, large swathes of the UK property market (particularly in London and the South East)
are simply overvalued. S & P Global Ratings, the US credit rating agency, believes that property
in London is overvalued by 50%, while property outside the capital costs 20% more than it
should.
It puts this down to a combination of ‘low-interest rates, the stamp duty holiday and excess
savings amid the pandemic’ driving up prices. And, while these are certainly all factors, there’s
more to it.
The COVID-19 pandemic also boosted the desire for larger and rural homes, the so-called ‘race
for space’. With many people working remotely, most of the time, buying property in Britain’s
major cities has lost some of its allure. Indeed, asking prices for four-bedroom homes and those
in rural areas have shot up.
However, at the same time, prices in cities like London have continued to escalate. And that’s
because, as legal restrictions have lifted, and some businesses encourage a return to the office
for at least some of the week, another group of buyers is moving back in (or at least within
commuting distance).
Finally, there’s a major mismatch between supply and demand. So much so, that Rightmove
estimates there is currently double the number of would-be buyers as there are sellers. Anyone
looking to sell at the moment would find a market in which the chance of finding a buyer in the
first week of putting a property on the market is the highest it’s ever been. And, with such
frenzied demand, comes frenzied prices.
What Could End It?
We’ve tackled some potential reasons why the UK property market is running so hot, now let’s
look at what could cool things down.
If you’ve paid any attention to the news lately, you’ll know that UK inflation is currently running at
its highest rate for a decade and is unlikely to get better anytime soon. The IMF predicts that the
UK will have the worst inflation in the G7 by the end of 2023.
In response, the Bank of England (BoE) has become increasingly hawkish, hiking up borrowing
costs to try and get things under control. Ordinarily, a sharp increase in the interest rate would
be expected to take the steam out of the housing market and prices would fall accordingly. After
all, that’s what happened in the early nineties.
However, the old link between housing prices and inflation appears to have been weakened.
There’s been little sign so far of any impact on demand for property. And, lest we forget, the UK
housing market came through similar external shocks in the global financial crisis and COVID
remarkably unscathed.
What’s more, so long as demand outstrips supply, prices will continue to surge, particularly at
the more spacious end of the market. Of course, more affordable housing would dilute demand,
but there’s been scant evidence of enough property being built to do this any time in the near
future.
We also need to consider the looming spectre of a potential recession. The war in Ukraine and
resulting energy crisis rumbles on and there are plenty of gloomy predictions as to what this
means for the UK economy were it to continue.
The UK housing market has proved recession-proof in the past and could do so again. But, it’s
worth sounding a note of caution. Interest rates were slashed following the last financial crisis,
incentivising market activity. With an ongoing fuel crisis and soaring inflation, this isn’t likely to
happen again, not least because the BoE has fewer fiscal levers to pull on this time around.
And, without cheap credit, the housing market won’t rebound anything like as quickly.
One final point is the double bind homebuyers currently find themselves in, caught between a
cost of living crisis and astronomical property prices. If left untended, we will reach a point
where homebuyers simply can’t afford to buy. When and if we get there will depend upon
decisions taken by the government and BoE in the next few months.


How Will Sanctions Against Russia Affect the London Property
Market?

The last few weeks have been horrifying. Virtually nothing appears to have gone untouched by the nightmare playing out in Ukraine and beamed in real-time onto our televisions and smartphones. And the same is true of the London property market.

Chelsea might be a long way from Kharkiv but as a multi-pronged crackdown on Russian money in the city begins, many fear that the London market could be in for a shock. 

The logic is simple: the top end of the property market is probably Britain’s most visible contact point with Russia. So it follows that any sanctions applied to the people that drive high-value real estate (Russian oligarchs) could have a knock-on effect on the market as a whole.

But is this accurate? Is the market really that sensitive to Russian investment or are fears of a dip unfounded?

The current picture 

First of all, it’s important to state that sanctions will likely have some effect. The Telegraph estimates that Russian Oligarchs accounted for a 36.5% rise in central London property prices as recently as 2007

What’s more, there is evidence that purchases by Russian oligarchs have increased in the last few years. Data from the Land Registry reveals a massive increase in titles registered to Russian property owners, from 86 in 2010 to 1,127 in 2021.

All of this amounts to a pretty hefty chunk of capital being removed from the London property market as assets are frozen and seized. 

Indeed, there are early signs of a fall in activity. Investors’ Chronicle reported that high-end estate agents Savills and luxury developers Berkley Group shed six and five per cent respectively in late February. 

The long term 

We’ve established that sanctions have had some effect on the London property market, but what does this mean in the long run? And could it benefit buyers at the lower end of the market?

Let’s tackle average buyers first. It’s certainly true that Russian purchases of central London property have contributed to spiralling prices in the capital. Again, it’s a relatively simple equation. Billionaires buy up property in highly desirable postcodes, then the slightly less wealthy are pushed further afield, the middle classes are forced outwards until you end up with a situation where a studio flat in E10 costs north of £150,000 (for a much more elegant analysis of this process, we recommend this piece by author Rowan Moore). 

Therefore, it is possible that sanctions could lead to a slight decline in London property prices. However, this isn’t all that likely. Unfortunately, the real effect of the Ukraine crisis on ordinary buyers will probably come from its impact on inflation and interest rates. The Bank of England is going to have to do something to combat skyrocketing energy prices and that will almost certainly come in the form of meaner fiscal policy.

Let’s move on to the future of high-value property in London. For all that Russian money has catalysed rising house prices in London, this actually represents a sizeable minority of the luxury market. It’s no secret that the world is not exactly short on billionaires. And Russian buyers’ contribution pales in comparison to that of Hong Kong, China, the Gulf states and, more recently, southern Asia. 

Regardless of fast-tracked legislation to tackle ‘dirty money’ entering the UK, it’s unlikely that the globe’s super-rich will cease to see London as one of the premier destinations for property investment. Nature, or rather the market, abhors a vacuum and, while sanctions against Russia may cause a short term dip in prices, don’t be surprised when investors of other nationalities step into their place and push the needle right back up again. 


How Well Do Help to Buy and Shared Ownership Schemes Work? 

Schemes like the government’s Help to Buy and shared ownership were once trumpeted as the answer to falling homeownership in the UK. But, after a decade of Help to Buy, how well have these schemes really worked? 

Help to Buy

Help to Buy is an equity loan scheme that allows first-time buyers to purchase a home with a 5% deposit. The loan portion of the scheme covers anything from 20-40% of the home’s value (depending on where you live) with the rest covered by a standard mortgage.

The idea behind the scheme is simple, by allowing for a smaller mortgage, it removes the need for a large deposit – one of the biggest barriers to entry for first-time buyers. Sounds pretty useful in theory, right? Let’s get into how well it works in practice.

Starting with the positives, the scheme has helped an estimated 200,000 people in the UK buy a home. And it’s also true that the loan portion of Help to Buy can allow first-time purchasers to access more competitive mortgage rates than they would otherwise be able to.

However, there are some downsides. Firstly, the amount buyers have to pay back isn’t fixed. The loan is based on a percentage of the home’s value, so there’s every possibility that buyers will have to pay back much more than they borrowed. On top of this, after the sixth year of repayment, the interest rate is tied to the Retail Price Index, plus 1%. This means that if interest rates increase, buyers could be faced with unmanageable fees. 

You can make the argument that this is no different from many other loan agreements, but it’s hard to escape the feeling that it isn’t very helpful for buyers who are already struggling to afford a deposit. 

The second glaring flaw in the scheme is that it only covers new-build homes. There are a couple of problems with this. One, the number of new-builds being built lags far behind demand. Two, it gives buyers little choice and they’re much more constrained by geography.

There’s also the spectre of negative equity. Many commentators fear Help to Buy is artificially inflating house prices and that the market could tank once the scheme ends, leaving buyers mired in negative equity. 

Finally, let’s zoom out and look at things at the macro level for a moment. The House of Lords report on meeting housing demand was absolutely scathing about the scheme, even going so far as to state the £29bn spent on it has been ‘wasted’. The report goes on to say that the scheme does little more than ‘inflate prices by more than their subsidy value’ and that the money would have been better spent ‘increasing housing supply’. 


It’s hard to argue with these points. Homeownership continues to fall across the UK and the age of first-time buyers is creeping up year on year. What’s more, the scheme has mostly been accessed by young people who would likely have bought anyway (with help from family) and hasn’t done enough to help those from middle-income or working-class backgrounds who currently find themselves locked out of property ownership.

Shared Ownership 

We’ve dealt with help to buy, let’s take a look at shared ownership. Shared ownership is effectively a halfway house between renting and purchasing a property. It allows first-time buyers to take out a mortgage on a portion of a home between 25 and 75%, with the remainder being owned by a housing association (in most cases). 

Once again, let’s begin with the positives. Like help to buy, shared ownership can provide a stepping stone out of renting and onto the property ladder. Buyers typically need a far smaller deposit for a shared ownership purchase (due to the smaller mortgage). And, even though the mortgage and rental payments can add up to more than a full mortgage, it’s still a relatively achievable route into homeownership. 

Shared ownership also has a key advantage over renting, besides having a stake in the property. The portion of the home a buyer owns can increase if the value of the property goes up. This provides some equity to help homeowners take the next step on the property ladder.

Now for the snags in shared ownership. 

Most obviously, buyers are still effectively tenants. This means paying rent on top of mortgage repayments, the possibility of eviction, and service charges for communal areas. Worst of all, buyers are not due any reimbursement of the money put into the property if they are evicted until the property is sold.

Then, there’s the leasehold issue. As we’re all aware, a leasehold property becomes progressively harder to sell and the value decreases rapidly the longer it’s owned. Of course, this can be avoided with a lease extension but that’s not always an option. Much like we discussed earlier with help to buy, this raises the threat of negative equity or an effectively worthless property. 

Another issue is ‘staircasing’. This process allows tenants to buy more of the property over time, in smaller, more manageable chunks. It sounds great in theory, but it comes with some pitfalls. Staircasing requires the owner to save for multiple (albeit smaller) deposits and pay for searches, surveys and legal fees each time they want to up their share. This potentially makes it more expensive than the ‘one and done’ approach of a traditional mortgage.

Some Conclusions 

Help to buy and shared ownership do represent an attempt to at least do something to help first-time buyers onto the ladder. However, it’s difficult not to conclude that both schemes are ineffectual alternatives to the complicated business of building more houses or tackling the huge number of empty properties.

Both schemes are riddled with flaws and pose little real value to most first-time buyers. Yes, it’s true that both do offer a way onto the property ladder, but it’s worth asking whether that’s worthwhile when they potentially create more problems for new homeowners than they solve.

Unfortunately, the dwindling numbers of first-time buyers is a systemic problem that requires a systemic fix. Schemes like Help to Buy might win votes or gloss over the issue for a while, but there’s no shortcut to fixing the affordable housing crisis.



Will 2023 be the Year of the Holiday Home?

For a lot of British people, owning a holiday home is the pinnacle of aspiration. So many of us dream of that bolthole in the Lake District or on the craggy Cornish Coast.

However, from April 2023, the tax system for holiday homes is changing. At present, owners of second homes in England can avoid paying council tax and apply for small business rates relief by stating their ‘intention’ to let the property out to holidaymakers.

From next year, second homeowners will have to prove holiday homes are being rented out for at least 70 days a year to access small business rates relief. Evidence can be provided in the form of websites and brochures advertising the let, letting details, and receipts. 

Properties will also have to be available to be rented out for 140 days a year to qualify for this relief.

Why the Change? 

In the words of Secretary of State for Levelling Up, Michael Gove: 

“We will not stand by and allow people in privileged positions to abuse the system by unfairly claiming tax relief and leaving local people counting the cost.

The action we are taking will create a fairer system, ensuring that second homeowners are contributing their share to the local services they benefit from.”

He has a point. There is plenty of evidence to suggest that many second homeowners are using the original rules as a tax loophole, without ever renting their property out to holidaymakers. Indeed, anyone who has ever been to the UK’s beauty spots out of season can attest to the sheer number of homes standing empty. 

Let’s take Cornwall as an example. Cornwall is one of the most economically deprived counties in the UK, with soaring child poverty rates. At the same time, its house prices have skyrocketed during the pandemic. For local people, this has meant crippling living costs and in some cases being forced out of the villages and towns they call home.

It’s clear that, as a county, it’s in desperate need of well-funded public services to cater for the local people. All this rule change asks is that affluent second homeowners in area’s like this pay into the local economy they benefit from. 

What Could It Mean for the Housing Market?

So, we know why the change is taking place. Now for the bigger question. What does this mean for the housing market as a whole? Are we set to see a sudden influx of second homes on the market in late 2022 as owners look to cut their losses?  

Not quite. There are around, 65,000-holiday lets in England that are currently liable for business rates and around 97% of them have rateable values of up to £12,000. Under current rules, these are eligible for small business rates relief. 

It goes without saying that £12,000 is a substantial amount of money. But for many of those with the wealth to buy a second home, it’s not likely to be enough to induce them to sell up. What’s more, the short-term rental market is still a very attractive proposition for any would-be landlords despite the extra costs. 


Naturally, there will be some owners who baulk at the additional costs and choose to sell up, but we expect them to be in the minority. In fact, what’s much more likely to drive any surge in sales in places like Devon, Cornwall and the Lake District is high demand.

There’s never been a better time to sell in many of England’s top tourist spots. Devon, Cornwall and the Lake District have all seen at least 10% price rises in the last year. It’s partly down to these areas’ increasing popularity as holiday destinations during the pandemic (with foreign travel off the cards for many). And it’s partly down to the widescale adoption of remote working, as many of us realise that some sea air and coastal views are preferable to city living if you’re not constrained by commuting into the office. 

To draw some sort of conclusion, expect to see demand continue to rise in popular holiday destinations and prices to follow suit. However, it’s unlikely that much of this will be driven by the government closing tax loopholes. 


What Does 2022 Have in Store for the Housing Market?

A frenetic year is drawing to a close. 2021 will probably go down in conveyancing history (if such a thing exists) as the year the housing market outperformed all expectations. We’ve seen record highs for mortgage lending, property transactions, and house prices. And, even after the end of the stamp duty holiday, the market has remained relatively buoyant. 

So, what can we expect from 2022? What will happen to house prices? And will this be the year normality returns?

The return of normality? 

Let’s deal with the thorniest question first. After a frankly bananas eighteen months, is the property market beginning to return to something a bit more like normality?

Well, according to Rightmove, the signs are good. The property website has claimed the market is heading for a “less frenetic” period. The market will remain busy, with strong buyer demand continuing, but the picture should become a little more balanced as more homes are put up for sale and higher interest rates cool buyer demand a little. 

One apparent sign of this happening is the return to the traditional ‘December dip’ in both transactions and asking prices. The average asking price has dropped by 0.7% over the last month, which is much more in-line with what we’d expect to see in the run up to Christmas.

Of course, there’s a big Omnicron-sized caveat to all of this. We don’t yet know how the latest wave of the pandemic is going to play out or whether further restrictions will be needed. But, it’s to be hoped that the vaccines do their job and most elements of the market can continue as usual. 

The Build-to-rent Boom to Continue

We don’t usually cover rental property on this blog, for obvious reasons. However, there’s a element of the rental sector that affects conveyancers everywhere – build-to-rent.

Build-to-rent developments are, as the name suggests, new builds designed specifically for renting. They typically come with a range of perks beyond your average rental, such as longer tenancies, on-site managers, and purpose built communal spaces. 

The market in the UK is relatively small compared to the US at the moment but that’s changing, fast. There are an estimated 140,000 homes in production right now and more than 80% of them are in cities earmarked by the goverment for housing stock growth. 

As many of us rent for longer into our lives and the affordable housing shortage continues, expect to see more developers shift focus to this lucrative market in 2022. 

UK House Prices Continue to Climb 

2021 was a spectacular year for house price growth and many commentators are predicting more of the same, albeit at a slower rate. Leaders Romans Group believes prices with continue to grow throughout 2022, with a 3% rise over the year. Meanwhile, Rightmove predicts that growth will continue at the steady rates we’re seeing in the last two months of the year.

As always, location is key to understanding where we’ll see the highest growth. Essex, Norfolk and parts of the North West are among the areas tipped to see spikes. All of these locations offer relatively cheap prices for larger family homes, making them an enticing prospect for anyone looking for more space post lockdown. 

Could Energy Performance Become an Important Purchase Incentive? 

Climate change has been one of the most important issues facing humanity for some time. However, it’s only in the last couple of years that it’s risen so high on the agenda for governments and citizens alike. 

There are whispers about government legislation to impose targets on homeowners to improve the energy performance of their homes as well as greater general awareness about climate change. So, could 2022 be the year that energy performance becomes a much more important factor in buyers’ decision to purchase?

So there you have it. PIC’s (possibly foolish) predictions for 2022. If 2021 was anything to go by, we should have learned the futility of these sorts of predictions. But, we’re hopeful about the year ahead. All that remains is to wish a very Merry Christmas and a Happy New Year to all of our customers, partners, and readers of this blog. We look forward to working with you in 2022. 


What Does the Autumn Budget Mean for Conveyancers?

Much has been made of the government’s decision to make housing a key pillar in its ‘levelling up’ programme. But what will any of this actually mean for conveyancers? Let’s dig into the details, good and bad. 

The Bad News 

As with any government edict, the Autumn budget isn’t all good news for conveyancers. The Conservatives commitment to balancing books post-pandemic has seen investment cut in some areas and questionable attempts to raise funds in others. 

End of Help to Buy 

Much like the SDLT holiday, extensions to the Help to Buy scheme have been a common feature of recent budgets. But not this time. The scheme is now set to end permanently in 18 months. 

Help to Buy has come in for a lot of criticism during its time, with many fearing it would create an artificial housing bubble and inevitably lead to negative equity for many buyers. However, its incentivising effects on the market shouldn’t be underestimated. 

Help to buy has effectively acted as a government-backed subsidy for both developers and buyers. And, for all its flaws, it’s hard to argue that it hasn’t helped some people get on the ladder and incentivised developers to build.

Without it, there’s a very real risk that many of the major developers begin to scale back their new build operations. Indeed, this has already begun, with builder Bellway announcing this week that it would scale back ahead of the scheme’s end. 

Some will no doubt argue that the demise of Help to Buy is covered by the government’s 95% mortgage scheme (which has its limitations, as we discussed in an earlier blog). But unfortunately, this scheme doesn’t incentivise the building of new homes in the same way as Help to Buy. 

The result is fewer starter homes being built and an ever greater depression at the lower end of the market. It’s all well and good being offered a mortgage with a 5% deposit, but if you can’t find an affordable house to purchase, what’s the use? 

Residential Property Developer Tax 

Of all the announcements made in the budget, this is undoubtedly the one that generated the most headlines in the conveyancing world. Dubbed the ‘Grenfell tax’, the chancellor confirmed a £5 billion spend on removing flammable cladding from hundreds of residential buildings all over the country. And this will be funded by a levy on larger builders. 

This is a thorny issue. On the one hand, it’s positive news (more on which later), no one should have to live in an environment where tragedy could strike at any moment. But, on the other, it’s likely to affect the number of new properties being constructed.

It’s not hard to imagine a scenario in which builders scale back new-build development to pay for the levy being extracted by the government. Of course, people’s safety and wellbeing should come before anything else, but it would be foolish to assume this policy won’t have an impact on new developments. 

What’s more, it’s worth pointing out that the estimated cost of refitting cladded homes is somewhere in the region of £15 billion. You don’t have to be a genius to figure out that the £5billion earmarked represents a huge shortfall on what’s needed to resolve the problem. So, we could see a decline in new developments for the sake of policy which only partially fixes the issue it’s set out to tackle. 

No Specialist Housing Proposed 

Firstly, it’s important to state that the Treasury’s commitment to building 160,000 new, greener homes on Brownfield sites is laudable. Nevertheless, it’s a rather vague proposal that will do little to address many of the root causes of Britain’s housing crisis. 

The country needs new homes, that much is indisputable. However, what it doesn’t need are more luxury flats that are unaffordable for the people who need them most. The government’s focus needs to switch to producing affordable homes for first time buyers, social housing, and specialist developments with care and wellbeing services attached.

These are what the country needs. After all, there’s nothing ‘green’ about building yet more property that sits empty because few people can afford to or want to live in. Beyond the social benefits of building this type of property (such as taking some of the strain off of social and healthcare services), it would also give the market a much needed shot in the arm. 

The Good News 

So, that’s the bad news, what about the good? 

Safer Homes 

Although the Residential Property Developer Tax has its shortcomings, as we discussed earlier, on the whole, it’s a very welcome step. Firstly, because the Grenfell fire was an appalling tragedy that should never be repeated. Anything that contributes towards preventing a similar disaster should be applauded.

On top of this, it should also help inject some confidence back into this area of the market. We’ve all heard the stories about buyers who purchased expensive properties in cladded blocks, only to find their investment essentially worthless in the wake of Grenfell. 

And this has made many people reluctant to buy high-rise property, even in luxury tower blocks. It’s understandable. Would you want to live in a home that could easily catch fire at any minute? Or risk having to pay for the work to remove the cladding out of your own pocket? 

By removing cladding from residential buildings, developers are helping to rebuild confidence in high-rise living. It may require some short term pain in the form of a government-mandated levy but, in the long run, it should be good for the housing market. 

£24bn ‘Housing Settlement’ 

It might not be nearly enough to resolve the UK’s housing problems, but the £24 billion housing settlement proposed by the budget is a good start. In effect, this settlement is a commitment to ‘lock in’ most of the housing initiatives already underway. Former Secretary of State for Housing, Robert Jenrick’s ‘First Homes’ plan is set for a 20% increase in investment. Meanwhile, £11.5 billion is to be set aside for new build homes. 

These are all steps in the right direction and could help boost a sluggish market following the end of the SDLT holiday. 

Brownfield Development 

Like all the other good news we’ve covered, the £1.8 billion commitment made to unlocking 1500 hectares of brownfield sites to help deliver 160,000 new homes comes with some caveats. 

But, despite this, the additional funds earmarked for developing former industrial land should be welcomed. It appears to demonstrate that the government is serious about its commitment to Boris Johnson’s ‘brownfield first’ pledge made at the Conservative Party conference last month. 

CPRE’s annual State of brownfield report reveals that there is enough suitable brownfield land available in England for more than 1 million homes across 18,000 sites and over 26,000 hectares. And a commitment to unlock some of this land can only be good for future transaction numbers and the general state of the market. 

What Conclusions Can We Draw? 

Government policy is always notoriously hard to assess at the time of its conception. In truth, we probably won’t know effective this budget has been until long into the future. All the same, it is possible to draw some preliminary conclusions. 

There is much to be welcomed in this budget. The government does seem to be at least semi-serious about addressing some of the market’s problems. And the commitment to finally removing cladding from residential buildings is a worthy one.

Nevertheless, the budget could go much further. The government needs to address the types of homes it’s building, provide more support to first time buyers, and seriously consider how it can incentivise greater movement throughout the market – not just at the top end. 
This budget is a welcome sticking plaster, but we’re still waiting for the major surgery required. Who will provide it?