The Housing Secretary Sajid Javid has revealed a new government investment fund to help boost housing construction in Greater Manchester, Oxfordshire and the West of England.
Almost million is being put towards building more homes, as well as delivering local infrastructure projects like schools, roads and hospitals.
The fund is similar to the £ 120m grant to build 215,000 new homes in the West Midlands, announced by the Chancellor in the Spring Statement.
Of this, Greater Manchester is set to receive m to accelerate economic growth in the Northern Powerhouse and support the construction target of 227,200 new homes in the region by 2035.
An interim package of 120m will be given to the West of England, which covers Bristol, Bath, and parts of Gloucestershire and Somerset, to nearly double the number of new homes built each year from 4,000 to 7,500.
Oxfordshire will receive the rest of the funding, some m, which will support the construction of an additional 100,000 new homes by 2031, as well as the building of vital bridges, roundabouts and roads.
Meanwhile, the government announced that shortlisting has finished on bids for the bn Housing Infrastructure Fund, with 44 bids for high-impact infrastructure projects successfully progressing to the next assessment stage.
“This government is determined to build the homes this country needs,” Sajid Javid said of the fund. “That’s why we’re working with ambitious areas across England and backing them with investment and support.
“We’re also investing in local infrastructures like schools, roads and hospitals so that we can help unlock even more new homes in the areas where they’re needed most.
25,000 more first-time purchases in 2017 than 2016
First-time buyer numbers rose by 7.4% in 2017 compared to 2016, according to recent figures from UK Finance, the trade association for banks and finance firms.
According to the association, approximately 365,000 first-time buyer purchases were made throughout the last year, exceeding 2016’s total by more than 25,000 and reaching the highest level for a decade.
The report also revealed that the average age of a first-time buyer in the UK now stands at 30, whilst the average income of those taking their first step onto the property ladder was now
Last November, the Chancellor, Phillip Hammond, utilised the Autumn Budget to introduce the abolition of stamp duty land tax on the first of any property purchased by a first-time buyer, with the surprise move helping to boost activity in the final month of 2017.
Furthermore, interest rates remain historically low despite rising in November to 0.5%, although the Bank of England has indicated that rates may increase earlier than they originally intended.
Paul Smee, head of mortgages at UK Finance, believes that low mortgage activity will moderate the market in 2018: “2017 saw the number of first-time buyers reach its highest level in a decade, which is welcome news for those getting started on the housing ladder.
“But although the market remains competitive there is no room for complacency, with weaker December figures consistent with our market forecast of subdued growth this year.”
Retirement savers turn to property due to complexity of pensions and low interest rates
The majority of people believe that investing in property is the best way to fund retirement, according to a new survey from the Office for National Statistics (ONS).
49% of non-retired respondents claimed property was their preferred option for making the most of their money between July 2016 to June 2017, the latest Wealth and Assets survey reveals.
The second most popular method, employer pension schemes, was picked by just 22% of those surveyed.
With interest rates historically low, cash savings and ISAs have declined in popularity amongst the group; while personal pensions and premium bonds were favoured by less than 10% of those surveyed.
With the pensions system becoming increasingly complex, only 42% of respondents felt they had the sufficient knowledge on pensions to consider it as an option.
The survey also revealed that 23% of those not yet retired expected to downsize as a source of income in retirement, whereas 44% would use their savings or investments, further demonstrating the popularity of property as a means of funding retirement.
Growth in UK house prices is gaining momentum, driven by flourishing northern regions,
In their latest residential development land report, Savills predicts that property values in Scotland and the North of England will increase by 17-18% over the next five years – surpassing the UK average house price growth of 14%.
As a result of such strong performance, land costs across these northern areas are also due to rise exponentially, says Savills.
In particular, the value of greenfield land is expected to outstrip the national average of 1.7%, rising by 4.2% in Scotland and 2.7% in the North of England.
According to the estate agency, unlike many cities in the south, such as London, northern regions have yet to face affordability constraints – leading to greater opportunities for growth in these areas.
Furthermore, Manchester is seen as the leading driver of this trend, as house prices in the city rose by 8.6% in the year to October 2017 – more than double the national average of 4.2%.
Consequently, Manchester’s urban land prices have also seen significant increases, surging by 24% in 2017, compared to just 4% in the UK as a whole.
Also contributing to rising land values across the country is an increase in competition for land between large builders, medium-sized builders and housing associations, suggests the report
Mr Carney’s latest letter will be published in February, when the Bank of England will also release its quarterly Inflation Report.
Analysis, Andy Verity, economics correspondent
It may be the highest rate of inflation for nearly six years. But that tells you not so much how high it has got but how low it has been for so long.
In the past 10 years, inflation’s peak has been 5.2% (in 2011). Tell anyone over the age of 50 that inflation at 3.1% is out of control and you’re likely to get a scoff, followed by memories of the 70s and 80s.
What they may forget, though, is that for most of that time wages were also rising – and faster than prices. The tendency of wages to respond to higher prices and outpace them seemed to follow an iron logic back then.
Bigger price rises led to bigger pay rises, forcing many employers to charge higher prices to cover higher labour costs: the so-called “wage-price spiral”.
But those rules don’t seem to apply these days. The breakdown of that logic is why we have a squeeze on living standards. It is also why the Bank of England isn’t that worried about above-target inflation getting higher or even staying above target. In the City, a second rise in interest rates isn’t expected until August next year.
Lucy O’Carroll, chief economist at Aberdeen Standard Investments, said: “It’s quite possible that inflation is now close to its peak. But some of the latest surveys suggest that service sector costs and prices are rising. Given how dominant services are in the economy, this could feed through to inflation overall.
“That means that further interest rate rises are definitely not off the table.”
The ONS said that although airfares fell in November – down 10.4% – the decline was not as steep as last year when they tumbled 13.4%.
Data also shows that food inflation has picked up, especially prices for fish, oil and fats, such as butter and chocolate.
Figures from market researcher Kantar Worldpanel released on Tuesday indicated that food inflation hit 3.6% in the three months to 3 December, the highest rate since 2013.
It also noted that prices for butter and fish had grown as well an increase in the cost of fresh pork. Kantar said only a few items were cheaper during the period, such as fresh chicken and crisps.
Richard Lim, chief executive at Retail Economics, said that the rise in inflation had come “at precisely the wrong time for retailers”.
“In the run-up to Christmas, the cost of living, now rising at the fastest rate in five years, remains uncomfortably high for households.”
He said that food inflation “is one of the most transparent indicators of living costs and often the catalyst to cut back on spending elsewhere”.
However, he expects the inflation rate to now fall and could reach 2.5% by Easter.
The ONS will announce employment data for the August to October period on Wednesday, which will include figures for wage growth.
Ben Brettell, senior economist at Hargreaves Lansdown, forecasts that average weekly wages have risen by 2.5% during the period.
He said: “With wage growth picking up we should see an end to falling real pay in due course.
“That’ll be of small comfort, however, to households facing a significant increase in the cost of Christmas this year.”
Whilst decade of growth is highest in London and the south, occupancy rates in the capital remain low
Over the last decade, the value of the UK’s private residential stock has grown by trillion, with over half of it concentrated in London and the South East.
This brings the total value to over tn for the first time, an increase of 48%, according to recent research by Halifax.
2017 alone saw an increase of billion, putting the average value per household at compared to the 2007 average of 290k
Unsurprisingly, the southern regions owned the majority of the private property wealth; 68% ( 5tn) in 2017, up from 62% in 2007.
Of the 3tn raised in the last decade, 55% was concentrated in London and the South East.
However, homeownership is becoming increasingly difficult in the capital; with average house prices soaring 71% since 2007 to owner-occupancy rates are as low as 48% in London.
The UK owner-occupancy average, by comparison, is 63%.
Russell Galley, managing director at Halifax, said: “While more than a fifth of total property wealth is in London, lower levels of owner occupation reflect a major barrier to the property ladder with a far great number of people renting where house prices are at their highest.”
With high prices impacting occupancy and affordability, Savills reported last week that the southern regions are likely to see modest house price growth compared to areas like the North West.
In his budget speech this week, the Chancellor pledged 2 billion for the Home Building Fund to be targeted specifically at small and medium sized builders (SME) – allowing them to play a greater role in tackling the UK’s critical housing shortage.
Welcoming the announcement, Chief executive Brian Berry from the Federation of Master Builders (FMB) said that the government’s new goal of building 300,000 homes pa by mid-2020s, together with the 50 billion pledged in the budget to meet this target, will boost the sector.
Furthermore, a 700 million fund has also been promised to increase opportunities for small scale developments, by requiring councils to deliver more homes from smaller sites, which are faster to build.
Further commenting on the proposals, Mr Berry said that with Brexit on the horizon, one of the major challenges to building more will be a shortage of skills, as European workers make up a significant proportion of the sector’s workforce.
Ensuring that the UK’s building industry continues to have access to a skilled labour pool remains therefore a concern for many in the sector.
Liz Jenkins, partner at international services firm Clyde & Co, said:
‘Meeting the Chancellor’s ambitious targets will require an available and skilled construction workforce.’
‘In the long term we need to be attracting the next generation of talent into the sector but we have an immediate priority to create the skills we need to deliver new homes today,’ she added.
House prices set to surge in the north, while the south falls behind
The North West of England is set to see the strongest house price growth over the next 5 years, according to a report by leading estate agent Savills, with prices projected to rise by 18.1% between 2018 and 2022.
The region is followed by the North East and Yorkshire & Humberside, where prices are expected to increase by 17.6% in both areas – surpassing the UK average of 14.2%.
On the other end of the spectrum, southern regions are likely to see a more modest growth, as affordability continues to be squeezed in these areas.
The East of England and the South East are both projected to see a rise of 11.5%, while London will only see a small increase of 7.1% by 2022.
According to the company, the next five years is expected to follow the typical market cycle, where a more modest growth in London often leads to a surge in momentum for the North West and the North East.
With these areas being more affordable than the capital, they are more likely to attract first time buyers looking to put down a smaller deposit and avoid a large stamp duty bill.
Rents are generally also more affordable in these areas, compared to the south, which increases the possibility of retaining more graduates in the regions and, in turn, the demand for rental properties.
Commenting on the report, Lawrence Bowles, Associate at Savills, said:
‘Affordability in the capital is already more stretched than the rest of the UK, putting a brake on growth. But areas beyond the Home Counties have potential for growth: incomes have grown more in line with house prices, aiding affordability.’
Monetary Policy Committee voted to increase base rate to 0.5%
The Bank of England has voted to increase the base interest rate in the UK, ending more than a decade of interest rate cuts.
The decision, made by the Bank of England’s Monetary Policy Committee (MPC), increased the interest rate from 0.25% to 0.5%, reversing the emergency rate cut made in August 2016 in the aftermath of the Brexit referendum last year.
Citing the continuing weak performance of sterling and rising costs for households as core reasons for the decision, Bank of England Governor, Mark Carney, said that today’s increase marks the first of three rate increases over the next three years, but that these would be limited and gradual.
Rising interest rates would help to support the value of the pound in the markets, whilst providing savers with greater incentive. However, Mr Carney warned that the change would make the cost of borrowing more expensive.
The rise follows the publication of September’s Consumer Price Index (CPI) which showed that inflation in the UK had reached a level of 3%. The Bank – and the MPC – are targeted to maintain a CPI of 2% to prevent the economy from overheating.
In addition to sluggish productivity levels in the UK, Mr Carney said that ‘the decision to leave the European Union is already having a noticeable impact’ on the UK’s economy.
In the report accompanying the MPC’s decision, the group highlighted that ‘Brexit-related constraints on investment and labour supply appear to be reinforcing the marked slowdown that has been increasingly evident in recent years in the rate at which the economy can grow without generating inflationary pressures.’
New research has revealed that the construction of new homes must expand to meet demand……
More than a million new homes must be built over the next five years to address the ongoing shortage of houses in England.
Research published by conveyancing firm Search Acumen, based on data from the Office for National Statistics (ONS), has revealed that the housing market will continue being undersupplied unless the government intervenes.
According to ONS figures, the deficit of homes in England’s housing market has reached more than 530,000 since 2005.
Utilising current birth, death and migration rates, as well as the current Conservative manifesto pledge to build 300,000 new homes per year, Search Acumen’s research found that the shortfall is set to continue in the years ahead – with an additional 510,000 new homes needed to meet the demands of the market up to 2022.
This would mean that the total undersupply of homes in the English market would stand in excess of 1 million.
Warning of a future where those ‘looking for an affordable home simply cannot’, managing director at Search Acumen, Andrew Lloyd, called upon the government to make changes in their approach to the housing market.
‘Our research suggests that, even with housing supposedly higher up the political agenda, the pledges made at the last election won’t do the job of keeping up with demand in the long-term after years of under-investment into new housing,’ said Lloyd.
‘We just need our leaders to share our industry’s sense of urgency and begin laying foundations for our economic success right away.’