A property industry update Spring 2022
Thu 31 Mar 2022
Earlier this month Chancellor of the Exchequer Rishi Sunak laid out his financial plans in his Spring Budget Statement, which actually didn’t contain an awful lot pertaining to the UK property industry.
The main points he made:
-
An increase in the National Insurance threshold from July, giving workers more money. For someone earning £15,000 a year, this will put an additional £330 per year into their pockets.
-
A 5p fuel duty reduction. Although it’s not as big of a reduction as other countries, the Chancellor’s predictions put this cut at being worth £5 billion to the economy.
-
He also announced a 5% VAT cut on materials used to improve the energy efficiency of homes. That means that things like the installation of solar panels, insulation measures, or heat pumps are now at 0% VAT
But what about the UK housing market?
Aided by the furlough scheme put in place to help employers retain staff towards the beginning of the pandemic, the UK job market is buoyant, with unemployment rates at a 4% low, having returned to what they were pre-pandemic. Not only does this mean more disposable income, but for landlords, it means that ultimately tenants are less likely to struggle with rent payments as they may have done previously during the lockdown.
In addition to this, the ‘involuntary savings’ made by people unable to go on holiday or go out and spend during the pandemic are starting to get spent in the economy. It’s thought that these involuntary savings across the UK amount to £200 billion.
Despite an increase in inflation, this is not predicted to be long-lasting.
With the previously mentioned job market going strong, and the house-price to earning ratio seeing a decrease, more people are going to be able to afford to get onto the property ladder or move to a larger home to suit their needs. This is expected to contribute to property transactions returning to a pre-pandemic number of 1.4 million transactions a year.
Business confidence despite the pandemic
Despite there being relatively high numbers of the Omicron variant, the number of hospitalisations and deaths remains relatively low in comparison with previous variants. In terms of the economy, the bounceback from the pandemic has been around three years faster than initially predicted, taking just two years to reach pre-covid strength, in comparison with the 2008 financial crash which took the UK five years to recover from.
And finally, the cut in VAT making it financially viable to make energy efficiency improvements to their home is a huge step in the right direction towards the government’s target for the UK to be net carbon zero by 2030. For older properties especially, it’s a good idea to think about what energy efficiency improvements can be made sooner rather than later before everyone tries to make the same changes all at once.