How The 2016 Budget May Impact the UK Property Market

Chancellor George Osborne has commented on a number of political issues that will impact the UK property market, in his 2016 budget. Mr Osborne proudly announced that the UK is set to grow faster than any other major Western economy and is on course for a budget surplus. Additionally, one million jobs will be created by 2020, meaning employment rates will continue to rise.

We have explained the key points of the 2016 budget that may affect the UK property market below:

Employment rates and Education

According to recent data from the Office for National Statistics,  UK unemployment fell to 1.68 million between November 2015 and January 2016 down 28,000 from the previous quarter. Remaining at 5.1%, a decade-low rate, the government plans to focus its’ attention on driving investment into the education and enterprise systems, in order to maximise the opportunities available for young people. (1)

Moreover, the national wage for 21 and over in the UK is currently £6.70. From April 2016, this figure will grow to £7.20 for those over the age of 25. This will help to increase spending and improve the lives of those struggling to make ends meet. (2)

For primary and secondary schools, George Osborne has announced that the traditional 9am to 3:30 pm school day will be extended in order to accommodate and promote activities outside of the national curriculum such as dance, sports and drama. New funding will be made available for a quarter of secondary schools who hope to offer such activities.(3)

If employment rates continue to rise and more young people are able to achieve higher paid jobs, the demand for property will grow. In today’s society, many young people will spend a year or two in a job and then relocate in a bid to make valuable connections within their industry, achieve a higher paid position and inevitably climb the career ladder faster than ever before. This career relocation trend, dubbed the ‘Millennial Migration’ adds to the demand for high-quality affordable, city centre accommodation. Good news for HMO landlords.(4)

Help to Save

One of the key points to take away from the budget 2016, is the new benefit saving scheme available to low-paid workers in the UK. Millions of people will be eligible for this new economic helping hand from the government, which will reward individuals who are able to save a little each month.

Theoretically, for every £1 a person saves, the government will add 50p to their account meaning that if you put aside savings of £50 a month, you would receive a bonus of 50% after two years, worth up to £600. (5)

After conducting thorough research, the government found that almost half of UK adults had less than £500 set aside for a rainy day. In the UK, it rains more than we see the sun so the need for emergency savings is essential! The new ‘Help to Save’ scheme aims to encourage 3.5 million adults who received universal credit or tax credit to save money themselves which they would be able to withdraw at any point if necessary. (5)

The government also announced that as well as the national minimum wage for over 25s increasing as of April 2016, the national minimum wage for all would increase from October 2016. The new National Living Wage levels are shown below.

Age

National Living Wage (currently)

New National Living Wage levels

25+

£6.70

£7.20

21-24

£6.70

£6.95

18-20

£5.30

£5.55

16-17

£3.87

£4

Apprentices

£3.30

£3.40

ISAs that last a lifetime will help savers with financial incentives up to the age of fifty. Young savers will be able to earn £1,000 a year from the Government in a new Lifetime ISA. Osborne revealed that the ISA saving limit would be increased to enable anyone to open a tax-free ISA and save up to £20,000 a year. This ISA will enable young people to save for their first home or save for retirement, basically replacing the state pension scheme. (6)

With a push for people to save over-spend, people are likely to be considering their most expensive monthly cost, housing. For those who rent, considering the amount of money spent on rent each month might tempt you to look for more affordable accommodation, perhaps with the added convenience of a tenancy with all bills included, often found in HMO accommodation or one to two bedroom apartments.

Connecting the UK

Pressure to improve UK rail networks and motorways was a key feature in the budget. New rail lines have been given the green light, including Crossrail 2 in London and the much-anticipated HS3 link between Manchester and Leeds. This will dramatically improve the business investment potential that the North of England offers, by making it not only fast but also highly efficient to travel to and from the capital. (7)

The North of England has already been a promotional centrepiece for the Chancellor, on his travels to East Asia, where he dubbed it the UK’s ‘Northern Powerhouse’. In fact, Greater Manchester is set to receive substantial investment interest from China, thanks to the introduction of a new flight route, between Manchester International Airport and Beijing.

The government also plans to invest £230m in roads, particularly focusing on improving and upgrading the M62. For those who spend most of their working week travelling up and down the M62, you are set to see a massive improvement in journey times and congestion. Although, road works are never a pleasant site for UK drivers. (7)

Homelessness

Homelessness is everywhere and seems to be becoming more frequent. According to crisi.org a UK charity supporting homeless people in the UK, rough sleeping is on the rise. In 2015, the government estimated around 3,569 people sleep rough on any one night across England. This is a massive 30% increase from the previous year and double the number of rough sleepers in 2010, although figures may be even higher. (8)

As part of the budget 2016, the government is putting £115m towards reducing the number of rough sleepers in the UK. This could be seen as a partial win for Labour leader Jeremy Corbyn, who has been persistent in pushing this particular social issue in the past. (9)

The budget 2016 has some key points that will positively impact the UK property market. With employment at an all time high, a government incentive to save, substantial investment in transport and education and push to help the homeless, landlords can expect high levels of rental demand to continue with more people on the look out for affordable accommodation that helps them to count the pennies.

Sources:

1. BBC - UK unemployment drops by 28,000

2. GOV UK - National Minimum Wage Rates

3. BBC - Budget sets out academies plan and longer school day

4. Telegraph - Half of young workers ready for career switch

5. BBC - Budget 2016 

6. Mirror - Lifestime ISA £1000 Yearly Bonus

7. BBC - Budget 2016 summary 

8. Crisis - Homelessness Briefing 

9. The Guardian - Budget 2016


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