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London

The UK housing industry is facing serious headwinds, both immediate and long-term

Say Jones Lang LaSalle in latest residential research


London, 3rd August 2012 - The UK housing industry is facing serious headwinds, both immediate and long-term. Attempts are being made to address these but the straitjacket imposed by the lack of finance has been firmly tightened and economic conditions are unsupportive. Nevertheless prices are being reinforced by a lack of supply, low interest rates and, in central London, strong demand from overseas.

Latest residential research - Residential Eye, from Jones Lang LaSalle examines and discusses many of the key issues that are currently facing residential developers and the UK housing industry as a whole. We question the likely success of strategies proposed to address these problems and even suggest some innovative solutions ourselves.

The report also looks at how housing markets are behaving in the current economic climate and we present our forecasts for the future.  The main conclusions from this multi-topic Jones Lang LaSalle report are:

• UK residential property stamp duty rates create market inefficiency and stifle activity. We suggest that stamp duty rates are reduced across the board and that a progressive marginal rate replaces the slab structure.

• Housebuilding is at chronically low levels. Finance, economic and housing market issues are constraining development. Could innovative ideas such as developing for sharers, targeting investors, initiatives to encourage the release of family housing or a new PRS use class release the shackles?

• We are forecasting 0% house price growth for the UK this year but increases next year and in the medium-term as supply shortages constrain choice when demand accelerates. London and the south will outperform.

• Given the continued mortgage availability and deposit requirement problems facing aspirational home buyers, renting in the UK is forecast to expand further in the coming years. The main questions are where the stock will come from, who will invest and what happens when buying becomes more viable?

• The 2012 Budget provided much needed support for residential REITs but we do not believe initiatives go far enough in encouraging institutional involvement sufficient to boost either housing supply or institutional PRS ownership.

• We believe that the National Planning Policy Framework is intuitively sensible and is a step in the right direction – advocating brownfield sustainable development. But we need to release some greenfield land, as well as other proactive initiatives, if new development is to come anywhere close to meeting expected need.

• The new Central London development market has slowed a little in Q2 2012, but the best schemes are still selling exceptionally well.

• The 2012 Budget has left parts of the London residential market in limbo with some potential buyers and owners unsure of what to do. But once the new rules and taxes are confirmed we strongly believe that the London market will return to greater strength.

• The Budget, as well as other influences, has led to a quieter Q2 for the Prime Central London market. Price growth is positive, but barely so. Rental values are falling marginally as tenants balk at the higher rates, downsize or move to cheaper parts of London.

Neil Chegwidden, residential research director at Jones Lang LaSalle and author of the report concludes: “We believe further measures and more innovative solutions are needed if serious inroads are to be made into the obvious, fundamental and medium-term problems within the UK housing industry.”