Don’t believe what you read: the renewed threat of a mansion tax is not the Budget’s main consequence for housing. It’s merely a political sideshow. The relaxation of the planning rules will have a far greater impact, allowing businesses to determine what is built in a neighbourhood, so affecting the look and nature of the location — and house prices.
This change has been described as the most sweeping reform to planning in more than half a century. The Nimby tendency may have believed itself splendidly empowered by the Localism Bill, which was intended to give communities, not corporates, the right to decide on residential and commercial construction in their area. Henceforth, however, objection to a new housing estate, new business or a new Tesco could be trickier rather than simpler.
As we report elsewhere, companies are preparing to exploit these reforms. In future they will be permitted, like local people, to draw up neighbourhood plans setting out the need for, say, new supermarkets and housing in a town, suburb or village. It appears that planning permission for such schemes would be given automatically. As a paper released after the Budget puts it: “The default answer to development of the sustainable variety is to be ‘yes’ rather than ‘no’.”
Mercifully, the green belt and areas of outstanding beauty are to be exempt.
The move to put businesses on a par with local residents raises a number of questions. Did the Chancellor fear that the Bill would not produce the required number of new homes, as Nimbys would dominate community groups? Is the reform recognition that the much-vaunted New Homes Bonus scheme would not incentivise the local authorities to give their assent to new dwellings? After all, opposition to development is a councillor’s best platform for re-election.
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There is no question that the Treasury believes that the planning change will stimulate growth: the new dictum is that every £1 spent on construction contributes £2.84 to economic activity. It’s also evident that we will all have to pay far greater attention to proposals for new construction in our neighbourhoods, so that neither those inveterately opposed to all new development — however contextual or necessary — nor expansion-minded businesses hold sway. Could this change to planning be the Government’s way to compel us all to participate in the Big Society?
Address the regional gulf
The vogue for all things Scandinavian — there’s enthusiasm for the furniture, the food and The Killing, the cult Danish TV series — is spreading to housing market policy. This week RICS, the estate agents’ body, has issued a report on the strategy being devised by the Swedish central bank, to prevent property price bubbles. The key, apparently, is “soft-signalling”, alerting the public to the risk of a price spiral, but without actually mentioning this possibility.
The latest UK house-price surveys indicate that there is no imminent requirement for the Bank of England to evolve such a plan. Instead, a scheme must be formulated to arrest the widening of the North-South divide, as highlighted by both Hometrack and the Land Registry. These indices suggest that some areas are being starved of mortgage funds; the result could be a spiral of decline.
The Land Registry numbers show that prices in the North East and North West are down by 7.1 per cent and 3.7 per cent respectively over the past 12 months. London prices are up by 3.2 per cent, with some parts, such as Islington, rising by as much as 9.4 per cent. Hometrack attributes the capital’s resilience to dwindling supply and rising demand.
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Bankers and wealthy foreigners are another reason for the bounce: in December last year 86 homes of £2 million-plus were sold, against 63 in 2009. There is certainly the potential to raise some extra stamp duty from these deals, as some buyers will have benefited from avoidance ruses.
The mansion tax presents more problems. If all grand homes were revalued, it would be prohibitively costly. So it would be cheaper to impose the tax at the time of sale, once the property’s value has been determined. But with so few mansions changing hands, the amount raised would not be princely, unlike some of the homes to be targeted.
Wreck of the week
Some readers, we know, yearn for a property in need of rescue. So this week we bring you a picture of Elms Cottage, a medieval house in the village of Hinxhill in Kent. It is up for auction on May 11 through Hobbs Parker, with a guide price of £240,000 to £260,000. The restoration will cost up to £400,000, but once completed it could be worth £850,000.