Budget 2013: industry predicts
The construction industry comments ahead of chancellor George Osborne’s 2013 budget
Mark Farmer, Head of residential, EC Harris
On the wider UK housing market– including access to mortgages, house builder and developer funding and initiatives aimed at first time buyers: ‘Any extension to the NewBuy initiative will be seen as a good thing as many of the positive house builder results in the last 6 months have at least partially been attributed to the new 95% mortgage model for buyers of new build properties. Additionally, the Funding for Lending Scheme (FLS) has been seen to be freeing up the mortgage market in recent months. There is an expectation that this will be extended more into business lending in addition to mortgages so, in theory, should help developers and house builders seeking development finance to get their projects started.’
On the London residential market: ‘There has been some concern recently regarding the direction of government policy specifically in relation to London. The continuing flood of foreign investment into the London market, particularly at the higher value end, has prompted calls for measures to avoid increasing foreign ‘ghettos’ or unoccupied developments out of reach of domestic purchasers. Measures already announced to increase SDLT have had an impact. If the so called ‘Mansion Tax’ is also applied this will further add to the concerns from foreign investors that London is discouraging foreign investment. If this leads to reduced interest in property investment and development it can only be bad for the real estate and construction industries. The Mayor of London’s call to recycle London stamp duty to pay for affordable housing in the capital is one way of de-fusing the current politicisation of this issue as it directly link foreign investment to a direct benefit of more affordable homes for Londoners.’
Mike McNicholas, managing director at Atkins’ UK Design & Engineering business
‘It’s encouraging that George Osborne recognises the importance of infrastructure projects– we hope that firm decisions are made which will breed confidence throughout the industry. Continued investment in airports, roads and railways is needed to allow people and work to flow around the economy.
‘We also hope that the Government unlocks the funding necessary for the Priority Schools Programme and further investment in education. A shortage of capacity remains one of the biggest problems facing local authorities, despite the relatively low-cost building solutions available.’
Jon Sealy, UK managing director at Faithful+Gould
‘We see confidence returning to some key economic sectors but without increased spending on capital infrastructure projects any improvement faces additional risks.
‘The Chancellor George Osborne has already highlighted major infrastructure as an area where spending returns long-term benefits but we would like to see a co-ordinated campaign that also includes smaller public sector projects such as schools, GP clinics, roads and local government infrastructure run through frameworks. These are relatively inexpensive schemes that support the growth agenda and make a real impact locally.’
Ben de Waal, head of residential at AECOM
On local authority debt caps: ‘The “Coalition Conundrum” - to spend or not to spend. Spend and risk interest rate rises and potential melt down or don’t spend and lose the Election. Do what’s right but lose - not a happy place for a politician. Transformational grant programmes are unlikely to be on the agenda but could be an ace in the pack if Local Authority debt caps can be raised without detrimental balance sheet implications for Government. With debt sitting at an average of 16% of housing stock value there is scope for raising significant funds for a new wave of Local Authority led development – not to reproduce the prefabs of the past but to deliver high quality homes on underused land and infill sites which could provide 10,000 homes in London alone.
On bond guarantees: ‘Bond guarantees will certainly help achieve better pricing but the issue costs will still be prohibitive for many smaller Registered Providers (RP) with capital requirements of less than £100m. Collective issues remain one option but the Government should also be extending the guarantee scheme to underwrite the lease payments due under sale and leaseback or develop and lease type arrangements. Not only will this secure long term money for the RPs but it will also secure attractive liability matching income for the pension funds. A win win.’