Here are this week’s highlights in the UK economy.
Hunt launches fiscal plan . During his Autumn Statement on Thursday, Jeremy Hunt pledged to restore market confidence in the country by raising taxes and making deep spending cuts. A total of £26 billion will be used to help households dealing with the very high cost of living, which includes energy support, a rise in benefits and the State Pension, and a cash increase in the National Living Wage.
UK house prices will drop in the next two years. The Office for Budget Responsibility (OBR) forecasts a 9% drop in UK house prices between now and 2024 before it sets to rise again.
Hunt confirms 7% rent cap for social housing. The chancellor remains committed to protecting four million social housing renters as soaring inflation continues to eat up their wages. Without the cap, rent hikes are expected to rise 11%. Tenants are expected to save around an average of £200 next year. This does not apply to shared ownership rents or private sector rents, however.
British Land Co. valuation drops 3% despite rent hikes. The real estate investment trust (REIT) company reported that even though rental values rose across its portfolio, the valuation of its logistics, retail and campuses all declined in the six months through September.
Hunt to cut stamp duty cuts. The chancellor announced his predecessor’s initiative of doubling the threshold to £250,000 in September will be phased out starting March 2025.
Finanze Foresights:
The ONS predicts that property prices will fall by 9%, which many think will help first-time buyers in terms of affordability. However, their finances are currently squeezed by inflation, which reduces their ability to save for a deposit. So, instead of falling house prices offering the rental market breathing room after years of undersupply, we’re expecting vacancies to be much lower as we head into the new year. Last month, average private rents in the country reached an all-time high, according to Rightmove, with Greater London recording a 16.1% uptick. Newbury suffered an even worse hike with 22.2% over the past year.
This week, Bloomberg published an article that presents the plight of many UK renters who are trapped in bidding wars where they’re vying for a slot in tiny flats because of the rental supply shortage. Those who have been successful outbid competitors by hundreds of pounds (and are ready to offer higher rates on the spot), and willing to follow outrageous demands by landlords. Foxtons reported that in October, an average of 22 potential renters competed for each new letting. This has been the most intense bidding war in the last six years.
So, we get renters sharing cramped spaces, flats with extra beds in the kitchen, and existing renters securing their contracts before rents push higher next year. And to make matters worse, there was nothing from Hunt during the Autumn Statement that addressed renters’ problems since the rent cap only applies to social housing. Add in the burden of being pulled into higher tax brackets as a result of fiscal drag, and the future of renters becomes much gloomier.
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