UK Housing News
Record-Breaking Rents Outside London Underscores Need for New Government to Act
120,000 new rental homes are needed as rents outside capital reach £1,316 per month
David Hannah, Group Chairman of Cornerstone Tax, highlights three solutions the UK's new government can introduce to revive the housing market
Latest research from Rightmove has highlighted that rents advertised outside London have reached a record average of £1,316 per month, reflecting the UK's ongoing rental affordability challenges. With a 7% increase compared to last year, 2% higher than the pre-pandemic average, substantial annual rent increases continue to be unsustainable. London, which experienced an 18% increase in 2022, is now seeing slower growth at 4% yet, London's average advertised rent remains the highest at £2,652 per month, with 41% of earnings spent on rent. As Rightmove argues that 120,000 additional rental homes are needed to maintain pre-pandemic rent increase levels, David Hannah, Group Chairman of Cornerstone Tax, the UK's leading property tax expert, has urged the next government to support the ambitions of prospective homeowners by stating the following three viable solutions to help the next government support Britain’s ailing housing market.
Adobe
Reintroducing MDR:
“The abolition of Multiple Dwellings Relief (MDR) has generated yet another block for the UK's property market to overcome, particularly for those purchasing multiple dwellings in a single transaction. The change will incur higher stamp duty costs for buyers, calculated on the combined property value rather than the average, adding thousands to their expenses. Homes with annexes will now attract double the stamp duty, with property investors now having to purchase six or more units to reap the benefits of SDLT relief. By abolishing MDR, the previous government restored a historical injustice in Stamp Duty Land Tax. Furthermore, the already struggling construction industry will take another hit with the tax on developers increasing from 1-2% to 5%, leading to project abandonment and further increases in asking prices, as supply continues to lag behind an overwhelming demand for affordable housing.”
Reducing Local Sales Restrictions:
“Reducing local sales restrictions will significantly bolster the UK's housing sector by facilitating a more fluid and efficient property market. One key issue has been the rigidity and complexity of local planning systems, which often stymies the pace of new developments. By easing these restrictions, local councils could accelerate the approval process thereby increasing the supply of homes. This would help address the chronic undersupply that has plagued the market, with annual completions falling short of the government's 300,000 target. An increased supply would stabilise house prices, making homes more affordable for first-time buyers and those on lower incomes, ultimately contributing to a more balanced and equitable housing market.
“Moreover, developers would be incentivised to invest in areas previously considered unattractive due to bureaucratic hurdles. This would not only increase the overall housing stock but also stimulate economic growth in these regions.”
Reforming of Stamp Duty:
“A radical overhaul of Stamp Duty is necessary to get the bottom end of the housing market moving in the long term. SDLT payment bands have never been index-linked to house price inflation so an increase to these thresholds for all homebuyers would stimulate activity at the lower end of the property market. Raising the threshold would have the benefit of taking more properties outside the scope of stamp duty, cutting the cost of acquisition for people looking to climb up the property ladder.
“Those looking to purchase properties on the mid-to-high end of the property market would also have a chance to sell their low-end properties as a result of the increase in demand from prospective buyers, contributing to further momentum within the housing market.”
David Hannah, Group Chairman
