The boom and bust has impacted greatly on the UK’s housing market. With construction practically coming to a halt, an increase in renters and people unable to get on the property ladder, several reports with suggestions on how to help ease the housing crisis have emerged.
One idea to help boost the property market is the Policy Exchange Proposal, which is looking to councils to utilise their money in a more effective way. The proposal is for councils to sell expensive properties on their asset sheet, and use the money to build new, affordable housing.
Ajay Jagota, managing director of KIS Lettings, says: “I am pleased attention has turned to the property market and trying to boost the economy, as history has taught us that property can be one of the vehicles used to help economies climb out of a recession, but there are many factors to consider .
“Planning permission and land size are critical issues facing councils. While they might have land available, they need to be prepared to build on it. Another issue is timescale; the councils can’t build properties overnight and this will slow down any eventual impact on the economy and housing stock.”
A recent deal between Manchester City Council and Greater Manchester Pension Fund, thought to be the first of its kind in the UK, plays out suggestions in the Policy Exchange Proposal.
The council is providing land while the pension fund will finance the build. It is hoped buyers will be able to purchase a home for 20% less than normal market levels. Revenue will be generated through market rentals and capital return through house sales.
While Ajay welcomes efforts to boost the property market, he notes there are better, more effective ways of lifting the UK out of its housing crisis, which supports Cllr John Moss’s recent thoughts on the Montague report for boosting housing investment.
In 2006, Labour introduced simpler rules for pension investment, one of these focused on making it easier for people to create self-invested personal pensions (SIPPs). However, there was concern that SIPPs would be used to buy into the housing market, which was mainly being driven by buy-to-let investors in an already buoyant market. Due to this, the government left residential property off the list of SIPPs qualifying investments.
Moss is now encouraging this restriction to be lifted to allow for a private rented sector funded by people’s pensions saving, which buys long-term assets, provides a steady income and a safe store of value.
Ajay says: “I am behind Moss’s idea for allowing people to invest in the private rented sector through SIPPs. One of the main benefits is that they are tax efficient, so everything goes back into the SIPP; it’s a great investment tool.
“The main advantage of Moss’s idea is that it would give the public a chance to invest in residential property and reap the benefits, rather than just corporate pension fund managers.”