As we count the days down to the Budget, it’s pretty obvious to see that housing is going to play a significant part in the announcement, even if Chancellor Philip Hammond might be disinclined to borrow significantly in order to fund the building of new homes, as DCLG Minister, Sajid Javid, favours.
Stepping into this potential Cabinet rift is the Prime Minister herself who said recently that she is taking ‘ownership’ of the housing issue, that it has become a ‘personal mission’ and clearly wants to have this as a centrepiece of her Government over the next few years.
With Javid and, to a lesser extent, Theresa May, lined up on one side and Hammond potentially on the other, the Budget announcement looks interesting for any number of reasons, not least to see who ‘wins’ this battle. Javid made a speech just last week which included veiled criticism of Hammond for not backing big measures – including greater levels of borrowing – in order to get the UK the housing supply it needs.
He suggested the industry needed to take a ‘giant leap’ rather than piecemeal action – again thought to be a ‘pop’ at Hammond who clearly favours a more measured, less costly approach. Javid also shot down the views of ‘baby boomers’ who believe the UK doesn’t need more homes and are believed to be getting in the way of more construction.
What is also interesting is that Javid was already speaking from a relative position of strength – new figures revealed 217,000 new homes have been built over the last year; this is the first time in an age that the 200k barrier has been broken although it is still some way short of the 250k new homes each year the UK is widely thought to need. Given the cumulative shortfall that has built up over the past couple of decades, you would think realistically that figure probably needs to rise to 300,000-plus in order to meet demand.
This progress however will undoubtedly fuel Javid’s commitment to delivering on the Government’s housing ambitions, and such vocal support from the Prime Minister and her chief of staff, ex-Housing Minister, Gavin Barwell, is probably designed to heap further pressure on ‘Spreadsheet Phil’ to commit even more Government money. As mentioned, Javid wants many billions, and no doubt May is thinking about future elections and how the Conservative Party can appeal to younger voters who are appear least likely to vote for her and her party at the moment.
So, where might that leave us on Wednesday? Well, I suspect that a commitment to spend more will be made but it’s unlikely to be at the level demanded by Javid. You would also probably think there will be more pressure to make: developers who currently hold undeveloped land to use it, more public land available, to train more construction workers, and for existing house builders to build homes much more quickly and use new methods of construction in order to do this.
This latter point will clearly be of interest to advisers because, as it stands, there will be certain types of construction which are not acceptable. There may therefore be a challenge to come in getting lenders to accept these homes as security for the mortgage, although again I suspect the Government will be putting the pressure on lenders to do this.
In a wider sense, a considerable boost for the new-build sector is likely to mean a potential surge in demand for new-build mortgages and those advisers who are not already active in this market, might well wish to look at the opportunities. That said, if you’re aware of specialist advisers in this market then you’re also aware of the commitments that needs to be made, including operating outside ‘normal’ office hours, which means late evenings and weekends, as this is when these types of customers want their advice. It would also clearly pay to link up with a builder/developer and to discuss what you have available, although you should be prepared for plenty of competition in this part of the market.
A couple of days until a Budget doesn’t give you a lot of time to prepare for what might be a surge in interest over the next week or so, but let’s be fair these developments are going to come ‘online’ over the next five to 10 years, so firms do have time to put in place a new-build advice proposition. We’ve certainly supported advisers within our network who want to branch out into this area and they are already reaping the benefits of such a decision. Perhaps, it’s time for you to join them?
Richard Adams is managing director of Stonebridge Group