Aside from the many economic uncertainties presented by the Brexit challenge, last week brought us the first Autumn Statement from the new chancellor, Philip Hammond. There were a couple of headline grabbing items that look set to impact on the property sector.
A ban on letting agents' upfront fees
This is to be introduced 'as soon as possible' and was described as shifting the cost, estimated to be between £250 and £500 per renter, from the tenants to the landlords. It is certainly good news for those looking to rent as, with rent deposits and advance rents to pay, these fees can have a signficant impact on the overall cost burden.
It is not surprising that this has been welcomed by charities and consumer groups. That is not a view shared by agent bodies, one describing the move as draconian and likely to have a profoundly negative impact on the rental market. Certainly those opposing the move suggest that with margins tight the increased cost on landlords will simply be passed on to tenants in the form of higher rents.
This is not, it would seem, the experience in Scotland which outlawed charges of this type in 2012. One report found that rent rises were small and short-lived, pointing to the fact that rent increases since the introduction of the ban north of the border had been little different to those seen to the south.
The City would seem to support that notion to a degree given the share price reaction to this news for some of the larger letting agencies; falls suggestive that the cost may well prove to be one simply absorbed by the agent or, perhaps, might even encourage at least private landlords to dispense with the traditional agent and look to a more DIY approach supported by the ever increasing availability of focused internet platforms.
But what does 'as soon as possible' actually mean? The governments own website confirms that it will "consult on this in due course". Therefore your guess is as good as mine.
An extra £3.7bn for housing projects
In fact, the underlying figure appears closer to £1.4bn as it seems that around £2.3bn of this is intended for infrastructure linked to housing projects. In this regard the money is intended to support the construction of up to 100,000 new homes in the areas where they are most needed. The use of the phrase 'up to' can be assumed to be policital speak for 'the largest number we can credibly justify'.
The Chancellor has, however, confirmed the government's commitment to spending a further £1.4bn on affordable housing, with particular emphasis on the affordable rent, shared ownership and rent to buy sectors. This additional money is designed to deliver the creation of 40,000 extra affordable homes. It also seems that another £1.7bn has been earmarked for speeding up the construction of new homes on public sector land (though it is unclear whether this is new money or part of that already identified under the previously launched five year plan).
There will, of course, be a Housing White Paper published shortly which is trailed as setting out a comprehensive package of reform to increase housing supply and halt the decline in housing affordability. But the funds announced by the Chancellor yesterday, totaling £3.7bn, both come with the words "by 2020-21" so it may be some time before the impact is felt in hard cash terms.
There are two further measures worthy of mention:
First, the decision to raise Insurance Premium Tax from 10% to 12% from 1 June 2017. This may seem small beer but it will add £200 for every £10,000 spent on professional indemnity insurance premiums.
Second, the reiteration of the Budget 2016 commitment to create a new income tax allowance of £1,000 for property income which, for higher rate private landlords at least, will arguably go some way to compensating the fees ban already mentioned above.