UK Property News Week 11

Welcome to NestInsights, where we delve into the currents shaping the UK property market. Our focus extends across a spectrum of issues and developments that are pivotal to understanding the dynamics at play within the property sector.

This week, we turn our attention to influential stories that question longstanding norms and signal major shifts within the industry. Covering topics from the National Leasehold Campaign's (NLC) critical view on ground rents to pressing calls for Michael Gove to speed up rental reforms, each piece highlights the dynamic and changing UK property market. We examine the implications of removing inheritance tax, review Halifax's recent changes to mortgage application requirements, and acknowledge The Sunday Times' announcement of the best places to live in the UK for 2024.

Our goal is to offer a comprehensive overview that informs and empowers our audience to make informed decisions in a dynamic market.

Table of Contents

• NLC Counters the Necessity of Ground Rents

• Urgent Call for Michael Gove to Address Rental Reform Delays

• Advantages of Eliminating Inheritance Tax

• Halifax Implements New Age Restrictions for Mortgage Applicants

• The Sunday Times' Top UK Living Spots for 2024

• Signs of Revival in the UK Property Market

UK Property News Week 11

NLC Counters the Necessity of Ground Rents

In the evolving discourse on property rights and financial equity, the National Leasehold Campaign (NLC) has vehemently challenged the established norms surrounding ground rents in the UK.

Ground rents, traditionally seen as a financial obligation for leaseholders, have come under scrutiny for their necessity and impact on consumers.

The NLC, a pivotal voice in advocating for leaseholder rights, has welcomed recent scrutiny by the Competition & Markets Authority (CMA) into the practice of escalating ground rents, which have significantly affected leaseholders' ability to sell or mortgage their properties. The Campaign highlights the dire situations leaseholders find themselves in, unable to navigate the property market freely due to the financial and legal constraints imposed by ground rent policies.

Ground rents, particularly those that double every decade or are linked to the Retail Price Index (RPI), have been a focal point of contention. The RPI escalating clauses, in particular, have been likened to a 20-year doubling clause in terms of their financial impact on leaseholders, underscoring the pressing need for regulatory intervention.

The NLC's co-founder Jo Darbyshire has pointedly criticized the use of RPI as a "solution" to the leasehold scandal, arguing that it merely postpones the inevitable financial burden on leaseholders .

The CMA's involvement and the subsequent government consultation have led to a stark realization: modern leasehold ground rents are neither legally necessary nor commercially imperative. This acknowledgment is a significant stride towards addressing the leasehold dilemma, signaling a shift in perspective that could pave the way for more equitable property ownership models, such as Commonhold.

The Ground Rents Bill of 2022, which prohibits ground rents on new build properties, has been a legislative step in this direction, though it also creates a dichotomy in the property market by distinguishing between new and existing leasehold properties.

Katie Kendrick, founder of the NLC, has ardently called on the government to support consumers over entities that have historically exploited the leasehold system. The campaign for justice and reform in the leasehold sector is a testament to the collective struggle of leaseholders against an outdated system that has long favored financial institutions and property developers at the expense of individual property owners.

The conversation surrounding ground rents is at a critical juncture, with the potential for transformative change in how property ownership is structured and regulated in the UK. The NLC's advocacy efforts underscore a broader demand for fairness and transparency in the housing market, advocating for a future where property ownership is devoid of undue financial burdens and legal complexities.

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Urgent Call for Michael Gove to Address Rental Reform Delays

In a significant call to action, Michael Gove, the Housing Secretary, is being urged to address the delays in rental reforms deemed as "damaging and destabilising" for both tenants and the sector at large. Concerns are rising that the government's commitment to introducing new measures aimed at preventing homelessness is fading.

The National Residential Landlords Association (NRLA) and the charity Crisis have jointly expressed their concerns in a letter to Michael Gove regarding the future of the Renters (Reform) Bill, which is notably aimed at abolishing Section 21 evictions.

This legislation, described as the "biggest set of changes to the private rented sector for over 30 years," has hit a standstill, with no date set for further parliamentary consideration, fueling speculation of a possible government U-turn.

The bill's stagnation has resulted in a growing atmosphere of uncertainty and speculation, with reputable landlords hesitating to invest in new rental homes. This reluctance stems from the confusion surrounding the bill's future and potential amendments, which have yet to be disclosed by the government.

Such uncertainty is harming the rental market, as the NRLA and Crisis highlight the detrimental impact this has on both tenants and responsible landlords. They are calling on the government to transparently publish any proposed amendments to the bill, emphasizing the urgency for its thorough scrutiny and passage through Parliament.

Moreover, the Mayor of London, Sadiq Khan, has criticized the government for its "broken promises" to renters, particularly concerning the significant rise in no-fault eviction claims in London, which surged by 62% in the past year.

The ongoing delay and potential dilution of the Renters (Reform) Bill's promises exacerbate the issue, leaving over 2.7 million private renters in London in a precarious position. Amidst these uncertainties, the Mayor has taken steps to support those affected by potentially illegal evictions and the exploitative behaviors of rogue landlords through funding for specialized charities like Cambridge House .

As the debate continues, the call for Michael Gove to take decisive action grows louder. The future of the Renters (Reform) Bill and its implications for the rental sector remain a focal point of concern for tenants, landlords, and policymakers alike. The outcome of this legislative stalemate will undoubtedly shape the landscape of rental housing in the UK, with significant consequences for all parties involved.

Advantages of Eliminating Inheritance Tax

The debate around inheritance tax is not just about numbers; it's about the fundamental principles that guide our economic policy and the vision we have for the future of our society. Ranil Jayawardena, MP for North East Hampshire, recently sparked a significant conversation by advocating for the abolition of inheritance tax, citing it as a move that could catalyze economic growth and ultimately increase overall tax revenue. Drawing from Sweden's experience, where the elimination of inheritance tax led to a surge in entrepreneurship, economic growth, and tax revenues, Jayawardena proposes a similar path for the UK.

In the UK, the standard inheritance tax rate is 40% on estates valued over £325,000, affecting less than 4% of all deaths.

However, this seemingly small percentage contributed £5.76 billion in tax revenue in 2020/21. Jayawardena argues that scrapping this tax could encourage more people to work longer, boost receipts to the Exchequer, and foster a more entrepreneurial spirit within the nation.

Sweden's experience is particularly telling. Since abolishing inheritance tax in 2004, the country has seen booming entrepreneurship and economic growth, challenging the assumption that inheritance tax is a necessary evil for revenue generation. This move has not only facilitated a more dynamic transfer of assets, encouraging investment in business and innovation but has also made family businesses more entrepreneurial. The result is a more vibrant economy where tax revenues previously suppressed by inheritance tax have flourished.

Jayawardena's stance is a bold declaration that policy changes, particularly around taxation, are not just fiscal adjustments but signals of a broader economic vision. Abolishing inheritance tax, he asserts, could be a non-inflationary measure that supports the UK's ongoing battle against inflation, providing a stable environment for economic growth without adding to inflationary pressures.

Critics might point to potential revenue losses or argue for more progressive tax reforms. However, the discussion opened by Jayawardena is a vital one. It's about examining the role of tax policy in shaping an economy that encourages hard work, entrepreneurship, and the efficient use of resources for both growth and societal well-being.

Halifax Implements New Age Restrictions for Mortgage Applicants

In a significant policy shift, Halifax, one of the UK's leading high street banks, has announced changes to its mortgage application criteria that directly affect the maximum working age of applicants.

Starting from next week, the bank will lower the maximum age it considers for earned income in mortgage applications from 75 to 70 years old.

This adjustment marks a pivotal moment for prospective mortgage applicants, as it potentially alters the landscape of who can secure mortgage financing and for how long.

The decision to implement these age restrictions underscores the evolving nature of the mortgage market and the need for banks to adapt to changing demographic and economic realities. Halifax's move to modify the applicable working age criteria is set to impact a subset of borrowers, reducing their borrowing horizon by five years. It's a change that speaks volumes about the bank's approach to lending, risk assessment, and customer demographics.

For the majority of applications, Halifax will continue to utilize the maximum working age of 75, indicating that this adjustment will not blanket all applicants but rather target specific circumstances. The bank assures that the maximum age allowed at the end of the mortgage term remains unchanged at 80 years, offering some continuity amidst these changes.

This update from Halifax comes at a time when other high street lenders maintain varied positions on the maximum mortgage age, with institutions like Nationwide and Natwest also setting their bars at 75, whereas Barclays opts for a slightly lower limit of 70. This diversity in policy reflects the broader banking sector's grappling with how best to serve an aging population while managing financial risk effectively.

A spokesperson from Halifax Intermediaries shed light on the rationale behind these adjustments, stating, "These changes have been made as part of a regular review of our lending criteria and will ensure we continue to lend responsibly." The bank's commitment to prudent lending practices is evident in this policy update, aiming to balance the needs of borrowers with the imperatives of financial stability and risk management.

This policy revision by Halifax is a reminder of the importance for potential borrowers to stay informed about the changing criteria of mortgage lenders. Those nearing the upper age limit for mortgage applications are especially encouraged to consult with financial advisors and explore their options early. As the mortgage landscape continues to evolve, staying abreast of such changes will be crucial for anyone looking to navigate the property market successfully.

The Sunday Times' Top UK Living Spots for 2024

In 2024, The Sunday Times once again unveiled its highly anticipated list of the best places to live in the UK, providing a treasure trove of locales that blend charm, community, and quality of life. This year's selection crowned North Berwick in East Lothian as the pinnacle of British living, marking a significant moment as the first Scottish location to win this accolade in the list's 12-year history.

North Berwick, renowned for its picturesque coastline and vibrant high street, edged out the previous year's winner, the East Sussex town of Wadhurst, to claim the top spot.

The town's blend of stunning outdoor landscapes, exceptional educational institutions, and family-friendly housing options played a pivotal role in its selection.

The Sunday Times' judges were particularly impressed by North Berwick's seamless transport links to Edinburgh, its community-centric beaches, and a plethora of activities catering to all ages. This coastal gem has proven itself as a place not just to visit, but to call home.

The accolades didn't stop at North Berwick; several other UK regions received honors for their unique contributions to quality of life.

Notable mentions included Wivenhoe in Essex, Clerkenwell in London, and Stirchley in Birmingham, among others. These areas stood out for their strong sense of community, bustling high streets, and forward-thinking initiatives aimed at sustainability, transport, and housing inclusion.

Helen Davies, The Sunday Times' editorial projects director and Best Places to Live editor, described the guide as a celebration of towns, cities, and villages that exemplify the best of living in 2024.

From the Scottish isle of Kerrera to the dynamic cityscape of Belfast, the list showcases a diverse range of living options, tailored to fit every rung on the property ladder.

This year’s selections underscore a shift towards locations that not only offer a place to reside but also a sense of belonging and community engagement.

Signs of Revival in the UK Property Market

The UK property market is exhibiting promising signs of recovery, a development that has been eagerly awaited by investors, homeowners, and potential buyers alike. After a period of uncertainty exacerbated by the COVID-19 pandemic and its subsequent economic repercussions, the latest data and trends are pointing towards green shoots of revival, indicating a more robust and resilient market outlook for 2024.

Increased Activity and Sales

One of the most compelling indicators of this revival is the significant uptick in property sales. According to research from property data provider TwentyCi, there was a notable jump in the number of agreed sales in the first two months of the year .

Specifically, "sales subject to contract" rose by 23% in February compared to the same month last year.

This resurgence is not just a flash in the pan; agreed sales were also 9% higher than in February 2019, the last year before the pandemic and related economic disturbances impacted the housing market. January saw 86,000 sales agreed, marking a 23% increase from January 2023 and a slight rise from the pre-pandemic levels of 2019.

Mortgage Rates and Market Optimism

Another encouraging sign is the easing of mortgage rates from their 2023 highs, enabling more buyers to enter the market. In January 2024, mortgage approvals surged to 55,000, up from 44,000 in September 2023 . This improvement in mortgage accessibility, combined with the Nationwide's house price index for February recording its first annual rise in house prices since January 2023, underscores a growing optimism within the market.

Prices were up 1.2% over the year, offering a glimmer of hope to both buyers and sellers that the market is on an upward trajectory.

Market Resilience and Forecast

Adding to the evidence of a market recovery, Zoopla's recent housing market report has highlighted sales agreed being 15% higher than the previous year, with the stock of homes available for purchase up by 21% .

The property site forecasts that approximately 1.1 million homes will be sold in 2024, which would mark a 10% increase from the previous year's total.

This positive outlook follows a year marked by concerns over mortgage rates, inflation, and predictions of a sharp fall in house prices. However, the housing market has proven to be remarkably resilient, withstanding higher mortgage rates and the cost of living pressures better than many anticipated.

While challenges remain, the current trends suggest a shift towards a more stable and growing market. For investors, homeowners, and prospective buyers, these indicators offer a beacon of hope and a signal that now may be a timely moment to consider entering the market or reassessing investment portfolios.

Conclusion

This week's property news underscores a critical moment for the UK property market, highlighting the need for significant reforms and adjustments to meet evolving demands and challenges.

From ground rent controversies to calls for action on rental reforms and changes in mortgage criteria, these developments reflect a broader call for more equitable and accessible housing policies.

As signs of market revival emerge, it's clear that strategic responses from both the government and industry are essential to capitalize on this momentum and ensure a sustainable future for UK housing.

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