Market

Levelling Up – what does it mean for first time buyers?

Headlines have been full of the Government’s “levelling up” policies to ensure jobs and homes for all. But, with rising energy costs and property prices spiralling, Ginetta Vedrickas asks whether the strategy will help first time buyers

WHAT IS LEVELLING UP?

The term “levelling up” was originally part of the Conservative Party’s 2019 election manifesto. The Rt Hon Michael Gove was appointed Secretary of State for Levelling Up, Housing and Communities on 15 September 2021, tasked with the job of improving opportunities right across the country in a bid to end regional disparities.

On being appointed, Gove said that the new strategy would ensure that people and communities who feel that they are being left behind can catch up with more job opportunities and better housing and that the levelling up plans would “shift both money and power into the hands of working people”. Contained within the strategy was the idea of devolving power out of London and the South East to areas which have traditionally struggled economically, with the intention, the Government says, of “spreading opportunity”, “backing community life” and “restoring local pride” to cities, towns, coastal areas and villages that may have been left behind.

The Government promised £4bn of grant investment into its levelling up fund, with money earmarked for new infrastructure such as roads, ports and cycling lanes, as well as regenerating town centres. Michael Gove recently unveiled specific new measures to help improve the lives of people in Blackpool – which has eight of the 10 most deprived neighbourhoods in the country.

The levelling up package includes a crackdown on rogue landlords by scaling up the local enforcement team to deliver more action on those not meeting current standards, plus a regeneration programme to create new homes and boost tourism. Longstanding neglect by some local landlords has led to Blackpool experiencing some of the UK’s worst housing conditions, with at least one in three properties classified as “non-decent”.

Blackpool is also among 20 areas in England set to receive a “King’s Crossstyle” transformation through what the Government is calling “an ambitious regeneration programme”. Homes England will work with local leaders to find new opportunities for regeneration, delivering new homes and jobs for the community.

Levelling Up Minister Neil O’Brien MP is on record as saying that a key part of levelling up is creating “a fair and just housing system that works for everyone”, which includes supporting more first time buyers to move on to the housing ladder: “Far too often when buying and selling properties, deals fall through, costing young people thousands of pounds in wasted expense. By providing all the necessary information up front, this can be avoided, and it will make the process of buying a first home much easier and more cost-effective.” By the end of May 2022, all property listings must contain a property’s council tax band or rate and the property price and tenure information.

COST OF LIVING RISES

The levelling up programme comes at a time when many of us are feeling poorer, with a major concern being the threat of rising energy prices. With a record increase in global gas prices, Ofgem recently announced a 54% increase to the energy price cap from 1 April highlighting the fact that more needs to be done to quickly reduce the reliance on fossil fuels. Transport costs invariably impact upon everything, from food to costs of building materials which makes renovating a home more expensive.

NEW HOMES ARE MORE ENERGY EFFICIENT

Buying an energy-efficient home where bills are not dependent on gas prices is becoming more attractive, say housebuilders such as Hayfield Homes. Since 2020, all homes built at Hayfield’s developments have featured air source heat pumps, electric vehicle fast charging points, energyefficient underfloor heating, enhanced insulation and fibre optic broadband.

“With the source of energy coming into each Hayfield site being from a fossilfuel-free source, all homes at our new developments will be zero carbon ready,” explains Sales and Marketing Director Kelly Sharman, who also warns that the number of homes the UK is building annually is still way below Government targets, which accounts for what she calls “sky-high demand”.

Buying an energy-efficient home may also qualify a buyer for a “green mortgage” where – as an incentive for the borrower to either buy a green building or renovate an existing one to make it greener – the bank typically offers either a lower interest rate or an increased loan amount.

BUYERS ARE LOOKING FOR SUSTAINABLE HOMES

Sustainability is now a key driver in people’s homebuying choices, according to research carried out by the Home Builders Federation. A recent survey showed that 73% of around 2,000 respondents are worried about the energy performance of their current home and 24% say energy efficiency is “crucial” to their next home move.

HBF conducted the survey to test sentiment among the British public towards more sustainable living, in the context of the recent energy crisis and growing general awareness of people’s individual carbon footprints. It said the results placed UK housebuilders “at the forefront of meeting public demand for more energy-efficient living” and shows that when it comes to selecting a new home, sustainability is now at the top of our criteria.

TAX CUTS FOR GREEN HOMES

In his recent Spring Statement, Chancellor Rishi Sunak revealed that for the next five years homeowners who “retrofit” their homes to make them greener will no longer pay 5% VAT on materials like solar panels, heat pumps, or insulation. He also announced details of a £9bn plan to support people with rising energy costs.

PROPERTY PRICE RISES HIT NEW RECORD

Figures for March from property portal Rightmove show yet another new price record as the average price of property coming to market jumped by 1.7% (+£5,760) to £354,564, breaking through the £350,000 barrier for the first time. The average monthly rise is the largest seen at this time of year since March 2004, pushing the annual rate of increase to 10.4%, with all regions and countries except London and Scotland now up over 10% annually.

Rightmove calls this “the best ever spring sellers’ market” but not just because of record price levels. “We enter the spring selling season with the biggest mismatch between supply and demand for this time of year ever measured by Rightmove, with more than twice as many buyers as sellers.” Rightmove believes that it is too early to know how the market will be affected by the longer-term economic impact of the devastating war in Ukraine. The portal forecasts “a less frothy market” in the second half of the year, although it believes that demand will continue to outstrip supply.

HOUSE PRICES ARE RISING FASTER THAN EARNINGS

The Office for National Statistics, ONS, recently published its annual release looking at housing affordability in England and Wales for 2021.The release brings together data on house prices and annual earnings to calculate affordability ratios. In England in 2021, full-time employees could typically expect to spend around 9.1 times their annual earnings on buying a home; an increase since 2020, when it was 7.9 times annual earnings. In Wales last year, full-time employees could typically expect to spend around 6.4 times their annual earnings on buying a home; up since 2020, when it was 5.8 times their annual earnings.

House prices grew faster than earnings in 91% of local authority districts, leading to a reduction in housing affordability. Copeland in the North West remained the most affordable local authority where average house prices were 2.7 times the average workplace-based annual earnings. Kensington and Chelsea remained the least affordable local authority in 2021, with average house prices being 36.5 times average earnings.

EXPERT COMMENT

Greater transparency and clarity when purchasing property, especially for the FTB market, is long overdue and I welcome the “levelling up” legislation. With about a third of all property transactions falling through, this injection of legislation will make a huge difference to the industry and to fi rst time buyers who often experience a stressful and time-consuming process when fi nally getting on the property ladder.

Henry Davis Property expert, mentor and author of The Truth About Property

EXPERT COMMENT

The Levelling Up paper outlines plans to increase output of genuinely affordable social housing, but these homes must be delivered in areas where people genuinely want to live – not simply where land is cheap and planning regulations are lax. It is also necessary that the right type of affordable housing is delivered. We know the value of shared ownership in allowing young people access to homeownership, and stock levels cannot be depleted in favour of other stop-gap schemes such as First Homes that ultimately do not help the people that really need the support.” that really need the support.”

Kush Rawal Director of Residential Investment, SO Resi

EXPERT COMMENT

In terms of cost of living, unfortunately, we ain’t seen nothing yet. After April, increased fuel costs will affect almost every aspect of our lives. Lenders are looking more closely at income/ expenditure of potential borrowers meaning multiples are likely to drop. FTBs may be shocked by the increased cost of renovations and essential repairs – something they have been insulated – something they have been insulated from when renting previously. from when renting previously.

Jonathan Rolande National Association of Property Buyers