Real Estate

Question 1

Autumn Budget

Answer 1

Rachel Reeves will deliver the budget on 30th October
Going to be painful, as it will aim to put £22billion back into public finances
Possible tax increases
Capital gains tax: tax on profits from selling property, shares and other assets. Potentially could increase to 45% tax on profits for those in the highest rate of income tax.
Inheritance tax: currently payable at 40% on estates worth £325,000+. Potential changes could include cutting the nil-rate band, changing reliefs or gifting.
Stamp duty: stamp duty exception for first-time buyers is currently £425,000, this may be reduced to £300,000.

Question 2

Mortgages

Answer 2

Interest rates: how much it costs to borrow money or the reward for saving it.
The Bank of England set a base rate which influences the high street banks and subsequently the general public
If inflation is high, the BOE may increase interest rates to encourage people to spend less and bring inflation down
The current BOE rate is 5%, but its expected to fall to around 3.5% in the coming months
Highstreet lenders are already lowering their rate for homebuyers in anticipation, meaning more people are looking to buy

Question 3

Planning

Answer 3

Labour have a target of building 1.5million homes in the next 5 years
To reach this, there needs to be government support and planning reform
Planning approvals are at a 10 year low

Question 4

Demand

Answer 4

Macro
UK population set to reach 74million by 2036
Micro
The traditionally busy Autumn period has started earlier than expected with many looking to act as mortgage rates trend downwards
That being said, it still takes on average 60 days for a seller to find a buyer (3 times longer than this time last year), as people await the anticipated second base rate cut and the outcome of the Autumn Budget

Question 5

Supply

Answer 5

Macro
Limited stock due to stringent planning regulations, limited land and slow construction
4million+ estimated undersupply of homes in the UK
Micro
The average number of homes for sale is at its highest since 2014, perhaps over speculation of capital gains tax increases and people becoming more confident
Average asking prices are up 0.8%

Question 6

Lettings

Answer 6

Macro
Housing supply shortages
Population growth
Demographic changes with a shift towards more people wanting to rent over owning
Micro
London rents at an all-time high
Demand is slowing, but there is still a large number of enquiries per property
Supply is up YOY
Rental inflation has slowed to 5.4%, but it is still ahead of the 5.1% growth in earnings

Question 7

Build to Rent

Answer 7

The rental market supply/ demand imbalance is expected to worsen
Tenants are being impacted by higher interest rates
Many private landlords are selling
The number of BTR developments in construction fell possibly as a result of high construction costs, labour shortages and more expensive debt
BTR achievable value is expected to be continually higher than the private sector

Question 8

Case for London

Answer 8

It is a resilient and stable market
Time zone bridges Asia-Pacific and North American working hours
Secure environment; attractive for its legal framework and robust property rights
40% of the world’s top ten universities
It is Europe’s tech hub, attracting more venture capital than other cities like New York
Steeped in history and culture, unparalleled lifestyle with all the modern conveniences