Though not the main focus, George Osbourne’s budget and speech will have implications for UK property investors. Our experts look at the government’s policy movements and the Chancellor’s pledges that together shape the investment climate for 2015 and beyond.
- Stimulating demand without tackling supply
- Financial migration from pensions to property
- A boost for regional locations
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While today’s budget largely focused on sweetening nationals – particularly low income families and pensioners – in the lead up to a general election that is just 7 weeks away, it has also provided some encouragement for the UK property investor.
The general health of the economy affects every element of business and George Osbourne has promised in his budget speech to relieve austerity. This may well have been facilitated more by tumbling oil prices than anything else, but it is nevertheless predicted that economic growth will sit at around 2.5% in 2015.
Stimulating demand without tackling supply
Property investors could also stand to profit from the Help to Buy ISA – a standard-bearing element of the budget and something that the government was somehow able to keep secret from the media before the announcement.
Through this initiative, the government will subsidise the property purchasing deposits of first-time house buyers. This will mean that more people will be looking to purchase property and this increased activity is likely to increase prices.
Ironically, this may drive some people out of the market, but such investors could find sanctity in alternative investment options, like car parks, hotels or student property, where the prices are considerably lower than residential properties.
Financial migration from pensions to property
The predictions made about economic growth are based upon increased consumer spending – something that will be facilitated by the Chancellor’s plans to allow pension savings to be freed up. However, many will use this financial freedom to invest in high yielding long-term investments more profitable than pensions.
Student property has been garnering praise as a profitable alternative. As such, this move by the government could well see investment in this popular UK investment sector increasing.
Given the focus of Osbourne’s budget speech, property investors will be buoyed by news that the government will potentially be jettisoning loan books. This will increase pressure on the mortgage industry and individuals alike. As alternative commercial property investments usually function without mortgages, this could well increase interest in these sectors, particularly given the media attention student property has been receiving after successive record-breaking years for the sector.
Critics of the budget have been quick to point out that it overlooks the necessity to catalyse the commercial and residential property investment markets. This could well be a deliberate move, since these investments have generally performed considerably better than the economy at large and the government could focus on more pressing matters.
There was, however, also no pledge to address the critical undersupply of properties through stimulation of the construction sector. This is another indicator that house prices are likely to rise, meaning that investors can expect strong capital growth in 2015.
A boost for regional locations
It is also interesting to see the government’s continued initiative to boost regional property markets. The City Deals, Enterprise Zones and business rate retention will all help stimulate more property investments outside London and across the UK. This will be a boost to locations like Leicester, Loughborough and Preston, which can rely on promised government investment throughout their various large-scale city redevelopment cycles.
For commercial property, there was a boost with a pledge to tackle the much-maligned tax on commercial property, and another to increase the tax allowances on investments. This will increase confidence and investment. Also, confirmation that non-residents will have to pay capital gains tax on resale of residential property removes some appeal of this asset form, meaning that overseas investors could turn their gaze more to commercial property sectors.