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PROPTECH-X ‘Proptech & Property News’: Michael Gove | SDLT | NRLA | Housing Market

Gove as housing secretary…what can it mean? 

Though I have never met Michael Gove, his cheerleaders are quick to state that he is like a brain on a stick; an image that conveys his huge intellectual capabilities.

I am not so sure that in any way equips him for the post now thrust upon him, as he still wrestles with other roles in the government, scandalous resurfaced audio, and club nights in Aberdeen

On close inspection, he does seem to have some of the familiar traits of his predecessor Robert Jenrick, who was compromised by the Richard Desmond debacle, among other things.

As reported in The Times recently, Gove received £100,000 from a British-German property developer just three weeks before his appointment. A spokesperson from the housing ministry was quick to go on record, saying that all donations to Gove had been declared. 

You cannot help but think that a Secretary for Housing should be above reproach and have no financial ties to bodies that might mire his office. But brushing this unfortunate truth aside, let us look at the biggest thing on Gove’s immediate agenda, the 300,000 new homes.

Lest we forget the EU battle bus promise of £350 million going to the NHS, each week if Brexit got done, which obviously failed to materialise. Now workers of all ages are shouldering the cash.

Having a big brain is one thing. Delivering and executing on promises, as we often find out, is something different entirely.

Sunak’s SDLT giveaway finally ends in nine days. What next?

The 30th of September draws near, and so too does the final, final deadline day for the stamp duty initiative.

Given that the UK housing market now has very few properties on the market, has the government made a critical error by encouraging a stampede of homeowners in a concentrated timeframe?

One thing’s for sure, it’s forced house prices up and distorted the usual ebb and flow of the housing market.

Despite Rightmove’s recently released upbeat message about the housing market, the reality is that agents in the UK have less inventory per agent than the preceding years, and new instructions are trickling in with super inflated price tags.

Some property pundits are drawing comfort from the fact that the scarcity of unsold property is keeping prices high and the sales cycle to a minimum. On average, a sale occurs in 35 days against a typical sales cycle of over 60 days earlier in the year. 

But if there are only a few houses on the market, and only a few coming to market, then the housing market has slowed. The first sign of a slowing market is people not moving, which means less inventory. Sooner or later, they’ll run out of things to sell.

Traditionally, the selling and listing season for estate agents runs until late October, with Halloween heralding long dark nights, weekend viewings, and a general slowdown as Christmas looms. Hope begins to rise once again in mid-January that the house moving public will shift into gear.

It’s true that 2021 has been anything but a normal year, and the vitality of the housing market has certainly been a surprise to all.

However, are we now entering a very different type of housing market, one where sky-high properties do not sell as they once did due, in part, to the tinkerings of an untested Chancellor with a penchant for poorly planned initiatives?

NRLA wants the Chancellor to back a tenant hardship loan

The National Residential Landlords Association has called upon Rishi Sunak to create a loan scheme to act as a safety net for tenants at the bottom of the income ladder. Specifically, the tenants who do not fit the criteria for means-tested benefits. 

Throughout the pandemic, the NRLA has been very vocal about the need to help tenants and landlords and the hardship that the pandemic has caused.

The Chancellor has of course been looking after the residential sales market by changing the tax rules around SDLT, but he seems less willing to focus on those in the lettings sector.

At present, it is estimated that just under 10% of tenants in the private rented sector are in arrears, a blow to both tenants and landlords.

In a recently published end of furlough briefing titled ‘Tackling the COVID Rent Debt Crisis’,  the NRLA states the following:

“Private renters and landlords across the country now face a cliff edge as a result of the end of furlough ending alongside cuts to benefit support. 

The Bank of England has noted that renters are more likely than any other group to have lost their jobs or been furloughed whilst the Government admits that many landlords are highly vulnerable to rent arrears.

This report highlights growing concerns about the impact that a failure to tackle COVID related rent debts which are affecting almost one in ten (over 800,000) tenants will have on their ability to remain in their homes and the damage it will cause to their credit scores. 

By the Government’s own admission, private renters have been one of the hardest hit groups by the pandemic. The proportion of renters in arrears tripled from 3% in 2019/20 to 9% in November / December 2020 [1]. In stark contrast, as the Government notes, “mortgage arrears have returned to pre-pandemic level,” whilst the proportion of social rents in arrears has not changed during the course of the pandemic. 

Additional research for the NRLA has found that of those in the private rented sector who, since lockdown measures started, have built arrears which remain to be paid off, 82% were not in arrears prior to the start of the pandemic.”

Will Rishi Sunak act now or will he look the other way and allow a big problem to grow bigger as the end of furlough and winter looms large?

Will the housing market be hit by inflation and mortgage hikes before Christmas?

Just as things seem to be getting back to normal, over 800,000 households are now facing higher utility bills, with gas prices rising six times in 12 months, and six energy firms failing in a very short space of time.

To compound this, we’re seeing wage inflation with over a million jobs unfilled, a new homes sector hit hard by a lack of skilled workers, and the breakdown in supply chains.

Despite the government’s assurances that everything is just a blip and things will normalise, we are likely to see the cost of living rise, which means that the Bank of England will be writing some difficult letters pretty soon.

There are also signs that the housing market, which was put on steroids by the Chancellor, might actually have a darker side at play. Despite the level of inventory, the volume of properties for sale is low, keeping prices high. Those buying properties with a mortgage were, in the main, looking at a fixed-rate mortgage option.

The significance of this is that buyers only look to fix their mortgage rate if there is a collective belief that the Bank of England base rate might rise from its 0.1% level, triggering the need to pay more cash each month if they just took out a variable rate. 

In a recent The Mortgage Introducer article, Darren Cook, head of analyser products at Moneyfacts, said: “Our latest research shows that over eight in 10 (81.04%) consumers looking for a new mortgage during August, searched for the availability of a fixed-rate mortgage…

“That leaves less than 20% of consumers searching for a variable rate mortgages, which may indicate that a vast majority of potential new mortgage holders may be more risk-averse in the current economic climate.”

If the wheels do start to come off and the housing marking falters, as it is the economic barometer of the UK on many levels, could it be the start of a very long winter of discontent?  

Weekly proptech news in partnership with Estate Agent Networking

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Andrew Stanton Founder & Editor of 'PROPTECH-X' where his insights, connections, analysis and commentary on proptech and real estate are based on writing 1.3M words annually. Plus meeting 1,000 Proptech founders, critiquing 400 decks and having had 130 clients as CEO of 'PROPTECH-PR', a consultancy for Proptech founders seeking growth and exit strategies. He also acts as an advisory for major global real estate companies on sales, acquisitions, market positioning & operations. With 100K followers & readers, he is the 'Proptech Realestate Influencer.'

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