Pre-Budget thoughts from Simon Brooks of Investec

Mortgage Introducer

November 22, 2017

Simon Brooks is lead originator at Investec Structured Property Finance

Conflicting policies

The government has made it clear that it wants to try and solve the “housing crisis”, but in the past it hasn’t looked at the problem holistically, which has led to conflicting single measure policies e.g. help to buy positive, stamp duty reform less so, PDR office to residential positive (in theory), buy to let income tax treatment less so etc.

Brokers question Labour’s Bank of England plan

Downfalls to tax policies

Major reform to stamp duty and tax on loan interest for buy-to-let investors has undermined demand for off-plan sales – exactly what funders require to de-risk otherwise highly speculative large scale schemes.

Trying to encourage investment in housing stock when recent tax reforms only go to dis-incentivise those with surpluses to invest in property is contradictory.

Failure to accurately assess the determinants of the shortfall in housing supply

We seem to want to solve the housing crisis with new build homes for first-time buyer but this isn’t the crux of the problem. First-time buyers are usually looking for 1-2 bed flats, yet we want our developers to offer good quality family housing.

When you buy your first car you hardly expect to buy a brand new BMW 1 series, so why should you expect to get a brand new flat?

The answer has to be around encouraging greater fluidity of the second hand market so that more second hand homes become available for first-time buyers and families.

Reform/restructure SDLT

If the government wants to genuinely look at housing supply properly it needs to start encouraging movement of the mid and top market to free up homes for people to move into after the shoe box they have bought on Help to Buy. This means looking at SDLT.

Most of us seem to make the biggest single profit of our lives out of our properties, so why SDLT is payable by the buyer (the person creating that profit for us) is puzzling, moving it to the seller is conceptually much easier for most people to consider given that most people move up the housing ladder not down it and thus each acquisition comes at a greater cost before you consider tax and all the other costs that run with it.

Providing encouragements/incentives for retirees to downsize into retirement housing with on-site care facilities will help family housing and reduce bed blocking and the strain on the NHS, but we need to find better ways of moving this market and so consider measures such as SDLT relief for those over 65, SDLT or capital gains tax deferment periods/windows so that people can buy a retirement home before they have sold their family home without the fear of paying huge capital gains tax.

New planning policy to increase developer confidence

PDR should also be phased out to be replaced with a more robust planning policy around homes provision that gives developers greater confidence around the time lines required to obtain planning permissions and the variability/subjectivity of decision making along the way.

We have heard rumours of the government looking at penalties for developers that do not develop consented sites; however how we achieve this when the stability around the sales market (how developers get paid) has been constantly toyed with sounds like it could increase instability in what is already a very risky business.

Increase and strengthen labour force, including measures to source, integrate, train and hold on to EU workers

Finally, we need to look at our construction industry and what we can do to provide more stability for contractors.

Our construction workforce is overwhelmingly EU imported and while procurement of materials can eventually be sourced elsewhere, the biggest problem the construction industry has is in maintaining the right quality of labour.

If we want to ramp up housing supply we will need more builders and so we need to put in place great measures to have these home trained as well as provide sufficient comfort for our EU workers to stay.

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