With the government considering reforms to house planning laws, how can investors take advantage of them? Paresh Raja, CEO of Market Financial Solutions (MFS), discusses the new plans
The long-term resilience and growth of the UK property market has made it a popular investment destination for those seeking secure returns, particularly in times of political and economic uncertainty.
With 2017 being a year of shock political announcements, questions over the government’s ability to deliver cohesive policy and effectively manage Brexit negotiations did little to undermine the performance of the residential and commercial property markets. Indeed, the Office for National Statistics (ONS) revealed that house prices across the UK grew by 5.2% in 2017, bringing the average UK house price to £227,000.
House price growth is a positive indication of market demand, and the UK has clearly not lost its allure for investors. However, with limited housing stock and high levels of competition among buyers, the question the government faces is how to ensure the imbalance between demand and supply is effectively managed so that houses remain affordable and attainable.
This is not a new question; indeed, over the past decade the government’s housing policy has focused on addressing the so-called housing crisis, increasing the number of affordable homes on the market in both urban hotspots and rising regional hubs. However, the lack of strategic guidance has undermined Westminster’s ability to lay down the foundations for a housing framework with long-term vision.
Recently, Theresa May’s cabinet has been vocal in its proposed measures to ‘fix’ the housing market. Having recently pledged to build an additional 300,000 new-builds, the government has now announced proposed reforms so that councils are encouraged to look favourably on upward development in densely populated areas. While the full details of these reforms are not yet known, this type of creative thinking has generally been welcomed as a step in the right direction, and could allow for an additional two storeys to be added to homes, shops and offices in urban areas.
For homeowners, adding new floors to their existing property can often add significant value, particularly in high-demand urban markets. What’s more, for buy-to-let landlords, extending a property upwards is likely to increase the amount of rental yield being delivered. In this regard, relaxing the regulations surrounding house planning could be a great opportunity. However, the extent to which people have the funds to actively pursue this venture is another question.
The finance options generally available for homeowners extending their property can range from personal savings, credit cards or unsecured personal loans.
However, for extensions that are likely to cost £25,000 and over, people could also consider bridging loans and mortgages. The mortgage options range from simply organising a new mortgage deal, or a remortgage. With the Bank of England considering a potential rise in interest rates from 0.5% as soon as May 2018, this could cause issue for those planning an extension. Bridging loans, which are secured against an individual’s existing assets, could provide a solution.
To alleviate the financial burden, it’s important for the government to consider new measures that encourage property investment, allowing homeowners to pursue house extensions and increase the amount of available space to rent or sell. These proposed reforms to house planning laws are a welcoming development, and hopefully a sign of things to come.
Paresh Raja is CEO of bridging lender Market Financial Solutions
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