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Newly appointed Minister of housing, Mark Prisk, aims to make planning policy less restrictive by suspending section 106 requirements for social homes on housing schemes in an effort to stimulate house building. Mark Prisk is part of David Cameron’s recent cabinet reshuffle and to stop the dithering to get the UK economy moving again.
The impact on the UK economy is insignificant because construction does not improve the balance of payments deficit which was £ 8 billion in goods and services between June and July 2012 (ONS). No products are exported and if anything more raw materials will be imported to during the construction process.
It is still a welcomed Housing Policy change for anyone who has had to deal with restrictive planning policy and all the hoops one has to jump through to get new build residential developments.
The Chief Executive of the Federation of Master Builders, Mr Brian Berry, said: “If we are to stand any chance of addressing the nation’s chronic housing shortage we have to remove the barriers that are currently preventing small and medium sized house builders from delivering badly needed new housing.”
How will the opening of planning policy help property investors? Restrictive planning is actually a benefit to buy-to-let landlords because decreased supply versus demand keeps property prices high.
The average property prices have decreased by 0.7% over the past year according to Nationwide. Their Q2 2012 report show price falls in 9 of the 13 regions across the U.K. The Association of Rental Letting Agents quarterly review Q1 2012 states that the average yield on residential property in the U.K is a mere 5.1%.
So what is the attraction for buy-to-let investors? Where are people investing?
The maximum loan to value mortgage is still hovering around 75% LTV. ‘High deposits and relatively low yields are making residential property investment fairly uninteresting unless the property can be sourced substantially below market value …’ says Arran Kerkvliet ‘Lenders are still being very particular with giving mortgage approvals’ adds the director of One Touch Property Investment.
On the other hand, people that have previously not invested in property are looking for much more straightforward investments. There has been a lot of excitement around the student property market because of the high yields and the fact that they are fully managed is appealing.
A major drawback is that majority of student property investments are cash only. Until now, that is.
City Centre Student Accommodation in Birmingham is creating a big stir; ‘We are very excited about being able to offer clients high yielding Student Accommodation Investments with Fifty percent finance in Birmingham and Liverpool. The fact that the finance is non-status, means that it is easily obtained, and with interest rates between 0% and 3% is very attractive indeed.’ Arran Kerkvliet commented.
Planning is still an important consideration in selecting the most suitable City to invest in student accommodation because it can have a huge impact on the future rental demand. Liverpool, for instance, is a City continually undergoing regeneration. The planning department is fairly open to planning applications to rejuvenate its old buildings and uplift the city centre. There has been a flurry of student property schemes being released which may impact future rentability in Liverpool.
The Planning approval for Student Accommodation in City Centre Birmingham has been comparatively low because of fierce competition for available sites with commercial property developers. Birmingham is the Third ranked city contributor to U.K GDP and a good place to do business. With less property being made available for students developments Birmingham City Centre looks set for a secure future.