In this week's blog, we are jumping straight into the Autumn statement and what these latest announcements mean for the housing sector and its associated asset classes. The recession word has finally been used, and although we may yet be heading for a soft landing, it's crucial now to take stock.
Suppose you are unlucky enough ever to be involved in a rear-wheeled skid. In that case, the official advice is "take your feet off the pedals. Stop braking and stop accelerating. Then, quickly turn the steering wheel in the direction you want to go", which more or less also sums up the evasive manoeuvres performed by Jeremy Hunt as he attempts to correct the economic course set out post the mini-budget.
Unfortunately, the markets seem hesitant to trust the driver, yet with a slight decline in the FTSE 100 and Sterling in the aftermath. Still, it was certainly nothing compared to the dramatic acceleration in bond yields seen previously, which indicates we may be back on track, albeit with a long road ahead.
One of the specific decisions concerning private-sector Housing was the decision to maintain the higher threshold for stamp duty; this has been a policy that has been retracted and then reintroduced, like prices doubling the week before the Black Friday sales, but for purposes of this analysis it's a positive step to stimulate the buyer side of the market into 2024 and prevent stagnation that will have an effect across the chain from development to end buyer.
Rental caps have been another hot point of discussion, and a critical point of note is that Private sector rental restrictions have yet to be mentioned. The public sector rentals concerning the cost of living crisis is an entirely different debate, not one pertaining to our commentary. If you are unsure what state-backed private rental control looks like, you can think back to the 90's sitcom Friends; that's how a group of folks in the gig economy managed to maintain the rent on half a million dollars worth of Manhattan real estate.
The mayor of London, Sadiq Khan, has called on the Government to introduce an initial 24 mth private-sector rent freeze in the capital; with 40% of Londoners reportedly struggling to make their rent, urgent action is required to prevent a crisis. However, there has been fierce opposition to this from the back benches, which may be an indication as to why it wasn't mooted as part of the budget; the mantra that underpins modern conservatism is growth, and rental caps would reduce the number of landlords in the market, reducing the number of homes, and ultimately shrinking the sector.
Now it's important not to be too flippant when discussing these issues; people struggling to rent their homes is a serious issue, and even though an initial rebuking of the notion of a private sector rental cap is positive for investors, it could easily be seen as callous, after all, Friends wasn't real, and wealth disparity sadly is, however, there are some important lessons to be learnt from what happened in America. In the short term, these types of caps helped affordability. Still, in the long term, they decreased the housing supply and created a spike in expensive rent guarantee insurance that proved counterproductive to renters.
So, in conclusion, we can cautiously look at the positives, the main one being the protection of the housing market seems front and centre, and there is a roadmap for growth in place, one in which investors can enjoy the compounding returns they have become accustomed to.
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