October 2021 | London

All change good news for London

Robin Johnson is managing director, Kinleigh, Folkard and Hayward Professional Services

What a busy September it’s been. Forgive me, but this month I thought I’d deviate away from my usual approach to this column. There are just too many things to fit into one theme, and actually, if anything the sheer number of comment-worthy things going on at the moment illustrates exactly why we all need to do some thinking. 

All change

First things first, let’s start with Westminster. Robert Jenrick is out and the new housing secretary is Michael Gove. This appointment is a bold statement from Boris Johnson’s government on the property sector; Gove is a minister who gets things done. He’s also known for being unafraid of pretty radical change, and indeed, within days of the cabinet reshuffle he had notified Parliament he was postponing planning reforms while he spoke to Tory rebels lobbying against the loosening off of regulation. 

There are several major challenges ahead for our new housing minister. Build more homes, tick. Sort out the ongoing cladding mess, big tick. Work out how on earth to cut the significant (in UK terms at least) carbon output of British homes, very big tick. 

Just the first of these has flummoxed housing minister after housing minister for decades. Relaxing planning rules and making it easier to convert commercial premises to residential stock was supposed to boost housing delivery; all eyes will be on how Gove opts to treat this legislation. 

Getting dangerous cladding off people’s homes, whatever the cost, must be top priority. It is scandalous that more than four years later people are still living in homes which, at worst, pose a risk to their lives and at best, have crippled them financially. In London particularly, as well as in other major city centres with lots of high rise buildings, cladding is the most distorting factor on the housing market. If Gove could fix this one thing and no other, it would be a job well done. 

So long stamp duty holiday

It was nice while we could get it but Rishi Sunak’s tax reprieve is as distant a memory as our summer holidays. Even before the market was fully weaned off this cash booster, the stats were showing the effect of its loss. 

Office for National Statistics figures show In England, the July data shows on average, house prices have fallen by 4.5% since June 2021. The annual price rise of 7% takes the average property value to £270,973. London saw the lowest annual price growth, with a rise of 2.2% while the monthly change was down 2% – the steepest since 1992 and the second steepest since 1968. 

Far from signalling a price crash however, this simply confirms what we all knew to be true – that sellers were factoring in the tax saving made by buyers on their purchases when they set asking prices. That added inflation will be dropping out of the overall average values index. 

Inflation starts to bite

It’s been heralded as the elephant in the room and a recent Bank of England survey discovered that an alarming number of consumers aren’t aware of the effect price inflation will have on their personal finances. The British economy is already starting to see what “unprecedented” public spending and quantative easing does.

Private equity has so much cash it can’t do merger and acquisition deals quickly enough. IPOs are coming thick and fast.

At the same time, energy prices are going through the roof for a host of geopolitical reasons, Brexit has piled the pressure on import and export costs, labour shortages in certain sectors are stymieing service delivery, massive pressure on supply chains globally are also driving up costs and government has just confirmed it plans to tax individuals more to pay for a crippled healthcare system. 

All this ultimately means less spending money for all of us. September 30 also brought the end of the universal credit uplift and the furlough schemes, both of which will put pressure on some households’ finances.

There will be implications for homeowners, renters and landlords.

Back to work

Finally, the great escape to the country that typified the onset of the pandemic and rise of home working looks likely to slow down considerably. Demand for rental accommodation in central London and its commuter belt has ticked up noticeably over the summer.

Employers are acutely aware that hybrid working patterns, while needed in some cases, actually hit productivity very hard – much harder than having everyone working remotely. 

With record job advertisements open, new staff need hands on training. Whether companies have taken a scythe to their workforce or been on a hiring spree, company culture cannot be cultivated with people who have never met one another. It’s back to work time, and that is good news for London property.