BENSON HERSCH: A thumbs up for Britain

Sam Cordon

December 9, 2013

The chancellor of the Exchequer gave a cautious “thumbs up” for the British Economy today.

The OBR’s forecast of growth, starting at 1.4% for 2013 and rising to 2.7% to 2019; plus the expectation of a continuing fall in unemployment, is positive for the building industry.

There will be £1bn in loans designed to boost housing developments in Manchester and Leeds, among other sites. The housing revenue account’s borrowing limit is to rise by £300m.

Councils are told sell off the most expensive social housing and regenerate run-down inner city housing Workers who live in council houses are to be given priority on housing lists if they need to move home to find a job.

Reoccupation relief will encourage the use of vacant shops, halving rates for new occupants. There will be a discount on business rates worth £1,000 to every retail premises in England with a rateable value up to £50,000.

Whether this, plus other measures will reverse the current trend for smaller retail businesses to disappear from the High Streets remains to be seen.

Once again, the need to increase the retirement age was flagged – there’s no doubt that, in turn, the mortgage industry will take this into account in future, and we will see new products, including 40+ year mortgages, mortgages with low capital repayments in the earlier years and stepped ones in future years.

All this is positive for a rising or stable housing market. The imposition of Capital Gains Tax from April 2015 on non-residents who sell residential property in the UK may have some negative effect on investment, but many of the higher-end properties are purchased by wealthy individuals, who see Britain as a stable country and wish to maintain a residence for current or future use. Any effect on higher-end properties, where prices have reached stratospheric levels, is unlikely to filter down to the general housing stock.

The chancellor said “Small firms are the lifeblood of our economy. That’s why we’re reforming the banks, introducing the employment allowance and now focusing the Funding for Lending Scheme to support them.” It seems unlikely that this will affect house pricing much.

The “Help to Buy” scheme is in any case providing assistance to FTBs. As Mr Carney said it’s “still early days!” Nevertheless, it’s interesting that challenger banks Aldermore and Virgin Money have announced that they are joining the scheme.

So, you ask, what has the above to do with bridging? Well, if the economy prospers, SMEs will require funding and people will be more confident in buying property. Where appropriate, bridging is a valuable tool for investors and homeowners alike, and will continue to be an important part of the so-called alternative finance market.

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