Bridging the property chasm
More than ayearhas passed since the UK voted to leave the European Union (EU), with official Brexit negotiations beginning at the end of June. Over the coming months, citizens will become increasingly aware of what the settlement between Britain and the EU will look like – and the property industry will be watching on keenly.
Since the referendum, the UK property market has proven resilient, exceeding many people’s expectations to report record growth – the average asking price for homes in UK hit a record high of £317,000 in April 2017. Critical to the ongoing strength of the market has been the widespread appreciation of property’s historic performance as an asset class; recent research showed that investors were turning to property in the current climate of political uncertainty because of its track record as a safe investment class.
Scotland’s property market has been robust – Edinburgh has emerged as one of the UK’S most coveted property investment hotspots. The UK housing market is, however, currently faced with the serious issue of undersupply. The Department for Communities and Local Government estimates that between 240,000 and 300,000 new homes are needed annually in England alone, while in Scotland the independent Commission on Housing and Wellbeing recommended that the Scottish Government should aim to build 23,000 new houses each year until 2020.
So far in resolving this nationwide problem, debate has largely – and understandably – centred on construction. New house construction has in fact steadily declined since the 1970s, despite record demand. However, one much overlooked segment of the market offering a far less costly and more timeefficient boost to housing supply is refurbishment and restoration.
An estimated 1.4 million homes currently lie unoccupied across the UK and, with the right support, it is entirely possible that property investors can bring these onto the market through refurbishment projects, easing the financial pressures faced by first time buyers in particular.
Yet at present a significant issue exists among those looking to invest in buy-to-let – a lack of access to finance. Recent MFS research found that one in four potential property buyers have or will consider refinancing their current home up to three times to support a new investment opportunity, demonstrating the need for tailored finance to support this category of investment. At this critical juncture for the economy, Holyrood and Westminster must face up to an acute undersupply of residential property – to address this issue they must not only focus on new construction but also refurbishment and restoration projects that have eased demand for property over the past decade. ● Paresh Raja is chief executive of Market Financial Solutions