Earlier this year, the government produced a white paper on the state of the housing market, and introduced initiatives that would be implemented going forward. This white paper has been long anticipated, particularly by investors, who have been waiting to learn how any new schemes might impact their investments.
Sajid Javid, Secretary of State for Communities and Local Government, delivered the White Paper in the House of Commons. He claims it provides a “bold, radical vision for housing in this country”.1 Here’s what the white paper reveals, and what it means for investors.
A ‘Crackdown’ on Housing Development Delays
The government has deemed severe delays in building developments of new homes to be “unjustifiable”.2 It is considered to be a serious issue that construction companies have been awarded contracts to build new properties, and are taking too long to put plans in place. Under current laws, builders are required to start the actual construction of new homes within three years of being granted planning permission. That will be reduced to two years under new regulations set out by the government, with more power being granted to local councils. This is expected to be good news for property investors. With fewer delays in building developments, more housing will become available faster.
Housing Developments Open to New Firms
There is something of a monopoly on the new housing sector, with just 10 firms responsible for the building of 60 percent of new homes.3 This makes it difficult for other developers, and other investors, to find viable opportunities in the property market. As a solution, the government has claimed it will look to broaden this pool of developers, with a focus on getting local housing associations and councils involved in development too.3 This supports a previous statement from the Conservative Party, to pledge £3 billion towards helping small and medium-sized builders compete against the larger organisations. As mentioned, this will help diversify the pool of both developers and investors. Opportunities to invest will become available to a wider range of individuals, who have connections with developers set to benefit from this scheme.
Committed to Lifetime ISA
This white paper reaffirmed the government’s commitment to the Lifetime ISA initiative.4 As of April 2017, a new ISA becomes available for those under the age of 40. The idea is for people to use this ISA to save money in order to buy their first home, and get on the property ladder. It provides individuals with a tax-free bonus of up to £1,000 per year. For every £4 you save into this ISA, the government will provide a £1 bonus. So you would need to save £4,000 to get the full £1,000 bonus. The idea is that this will give a boost to the housing market – creating more demand for housing, so there are more opportunities for developers and investors to create new homes.
Overall, the white paper offered positive news for these two groups, who will likely benefit as a result of some of these initiatives. Many will be keeping a keen eye on how the government decides to push on, in order to create a more robust housing market. As mentioned, some of the above schemes were introduced by the former Conservative government. It will be interesting to see how the new group handles this part of the economy.
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