So the 2013 budget came and went. As usual reactions to the Chancellor’s fiscal measures have been both positive and negative. The construction industry, although on the surface, seems to have gained a boost, will it really pan out that way?
Let’s look at the two main areas:
- infrastructure
- housebuilding
Infrastructure
In the 2013 budget, George Osbourne reiterated his commitment to the £40billion guarantee scheme for the UK’s infrastructure. Although this scheme was announced in July 2012 only 2 projects thus far have benefited from it.
The Chancellor remained pretty vague when it came to how and where this money would be used over the coming year while the construction industry waited with bated breath to hear that specific projects and work had been identified for this money. It didn’t come.
In addition a further £3billion was allocated for roads and power stations but again a considerable lack of detail was presented.
Although this money is a welcome input to the industry, confidence remains low as to when and how this money will be spent or if it ever will!
Housebuilding
So, we now have £3.5billion to help first time buyers get on the property ladder. The housing industry is still struggling in terms of new build numbers and in terms of sales by the consumer. The Chancellors answer is to offer a loan of up to 20% of the cost of the property and in addition a mortgage-backed guarantee of up to 20% of the Loan to Value of the property. The only proviso being that the buyer has to have at least a 5% deposit. The limit of the property purchase price is capped at £600,000.
So why is this good? Well it is hoped this will stimulate the new build market, not only in sales but also to help generate new housing projects. The doubters are worried this may create reckless loaning or a false ‘bubble’ which will burst when the funding runs out.
However if these measures pan out, it will certainly help the buyer but will it really help the industry? Unlikely. I believe that the investment and stimulation needs to come further up the food chain, more towards the source, in order to get our housebuilders back on site.
At the moment the number of new build homes being built is around 90,000 a year. Predictions indicate a need for 230,000 a year. This is a huge deficit in numbers and one which I am not sure will be cured with a small and possibly very temporary pot of money for first time buyers.
I guess we will just have to wait and see…