A survey this month of members of UK property industry body the Royal Institution of Chartered Surveyors shows that many believe the country’s exit from the EU will trigger a surge in residential property values.
Notwithstanding any potential Brexit boost, major structural issues that have long frustrated the housing market remain. Here are three key areas that the UK’s newly elected government and the property industry need to address in 2020.
Measures to boost supply
The Conservative party’s manifesto acknowledged that too few homes are being built each year, and that home ownership remains a challenge for many. Measures such as the proposed mortgage deposit scheme, through which the government plans fixed-rate home loans with only 5 percent deposits, might support first–time buyers. But we must be aware of unintended consequences, such as the inflationary impact the government’s Help-to-Buy equity loan scheme had on the price of newbuilds.
Without transformative measures to boost supply, demand-led solutions will not solve the housing problem. The government should look at reforming an outdated planning system to dramatically speed up the process, as well as releasing more land for development.
Embracing innovative construction methods is also crucial. It is encouraging that government body Homes England has taken the lead. Its £90 million partnership with modular home manufacturing company Sekisui and developer Urban Splash will support the delivery of modular homes in England. With a quarter of the construction workforce now over the age of 50, it is vital that the industry embraces technology to counter the challenge of the reduced availability of skilled labour.
Development lenders are increasingly comfortable with the nuances involved in financing modular units. Residential mortgage lenders have also shown an appetite to fund completed modular units, thereby providing developers and lenders with a viable exit. Moves to enhance industry standards for modular modes of construction, led by the RICS-backed Buildoffsite Property Assurance Scheme, will assist momentum and should be encouraged.
Housing development as a solution to the retail crisis
The plight of the UK high street presents an opportunity for the UK housing market. Vacant retail properties are prime for reconfiguration into new housing. This creates a mixed environment on ailing high streets and town centres, making spaces more community–focused. A plan to convert a cinema in Tunbridge Wells, in Kent, into ‘later living’ purpose-built housing highlights what is possible.
Retail and leisure have important roles in the placemaking activities of residential-led developers. Supporting mixed-use schemes requires lenders to structure loans by taking into consideration both sales and letting risk across different asset types. Although we understand the challenges retail is facing – and the negative sentiment towards the sector – it remains a key element of the built environment. However, it must be fit for purpose.
Building more social housing
Enabling councils to build and source the types of homes their local communities need is an effective way of driving development. It would provide local authorities with the flexibility to work with development partners, public or private, and select those that are best qualified to deliver quality social housing quickly and effectively.
We already hear that local authorities are becoming more active in buying block units from private developers. This should be supported as it will speed up the delivery of much–needed affordable housing. It also reduces the exit risk for developers and lenders, enabling them to move more swiftly on to their next project.