Simon Morris recently contributed to an FT Adviser article which discusses the government’s plans to tighten the planning performance regime, reduce housebuilding regulation and restrict tax relief for buy-to-let landlords.
Fixing the Foundations
The government has outlined its plans to raise productivity in a new paper called ‘Fixing the Foundations: Creating a more prosperous nation.’ The document states that Whitehall will implement several changes to the planning process.
These include: placing local authorities that make 50% of planning decisions or less on time “at risk of denigration.” The government says that there has been a rise of planning permissions dealt with on time from 58% in 2012/213 to 77% in 2014/2015. The Conservatives also used the paper to reveal that they will grant automatic planning permission on brownfield sites which are registered as “suitable for housing.”
The Director of Deloitte’s London Planning team, Jeremy Castle, questioned the move. He commented: “The planning announcement is a bold move towards addressing the slowdown in UK housebuilding. Further down the line, it will be a challenge to write a robust piece of legislation that grants automatic permissions for brownfield development.”
Building homes for first-time buyers
Furthermore, Whitehall has promised to construct 200,000 starter homes by 2020, which will be offered to first-time buyers at a discount of 20%. Cameron’s government have also said that they’ll include dispute resolution mechanisms for section 106 agreements, but not the zero carbon allowable solutions carbon offsetting scheme into their measures to reduce housing regulation.
The decision to build 200,000 starter homes for people who are looking to get onto the property ladder at a discount of 20%, was criticised by Gwynedd-based adviser advocate Evan Owens. He noted that “wages never keep up with house prices so the discount becomes meaningless over time – a waste of effort and money.”
Landlords should re-calculate risk vs. return
The FT Adviser article also outlined UK Chancellor George Osborne’s plans for the buy-to-let market. He revealed that landlords will no longer be able to deduct 40% or 45% of their buy-to-let mortgage interest from their taxes; relief will be restricted to 20%, the base rate of tax. This policy will be phased in over four years starting from April 2017.
Property specialist Simon Morris explained what this will mean for investors in the buy-to-let market. He commented: “Will the capping of tax breaks or the restriction of tax deductions increase maintenance costs and buy-to-let mortgage fees? If so, landlords need to re-calculate risk versus return, to determine whether they can generate a healthy return on their investment.”
How to generate healthy returns
As Simon Morris and FT Adviser explained, the government’s plans could affect investors throughout the UK residential property market. Investors should re-calculate risk vs. reward to determine how to generate a healthy return on their investment.
Furthermore, any investor who’s thinking of taking advantage of pension reforms to invest in buy-to-let should download Simon Morris’ new guide. This comprehensive guide explains the advantages and pitfalls of investing pensions in property, giving investors the information they need to form an effective investment strategy.