Piggy Bank

The housing market is an essential part of the economy that the government will need as part of the plan rebuild our financial system following the abrupt stop caused by Covid-19.  The UK and Scottish economies will need as many levers pulled as possible to get cashflow moving around the economy and infrastructure spend and house sales is one of the essential ways of doing this.  Solicitors, estate agents, letting agents, joiners, plumbers, electricians, decorators, house builders, Scottish water, Scottish power, Scottish gas, local authorities and HMRC are just some of the many who need house sales and house building.


The trickle-down benefits from a thriving housing industry are enormous.  Every new home built creates upwards of 2.84 full time jobs (with some estimates as high as 8) and every £1 spent on construction generating upwards of £2.64 in added value to GDP.  And with 37% of self-employed people working in the construction industry, taking every step necessary to infuse cash into this industry and encourage transactions and construction has rarely been so important to the national good.


There are virtually no house sale transactions ocurring at present due to the lack of certainty around clear title for lenders.  Last week on my BBC Radio Scotland Call Kaye phone-in I had a number of people ringing in with issues and here are some ideas that I believe the government should consider putting in place to help during the current period and beyond;


Home reports and surveys – The value of any property is what someone is prepared to pay for it (discounting exceptional buyers).  I have therefore never been a fan of the current set up of Home Reports, where surveyors place a value on properties based upon the most recently recorded comparable sales.  In a moving market (up or down) this is like driving whilst looking in the rear view mirror.  I gave evidence to this effect to the Scottish government committee after the initial Single Survey trial.  At this time the necessity of having a report up front will be causing additional unnecessary delay in the market.  No home reports can be take place during the lockdown and there may be people in dire financial need where home report access and surveyor access will create issues.


In addition to house sales, there may be people moving off fixed rate mortgage products and moving on to higher % variable rate products. One of the first industries that should be freed up after lockdown should be RICS surveyors.  This would allow people to re-mortgage (and therefore release much needed equity and funds).  We have also had the situation of a landlord client who would have put a couple of empty properties for sale on an online auction however the need for Home Reports in advance stopped that.  In preparation for the possibility of a further lockdown after restrictions are eased, perhaps we should also consider suspending the need to have a Home Report in place before selling as this may allow people to quickly get their house up for sale and sold when urgent cash is needed.


LBTT Suspension – As we go through the price levels, LBTT can be quite a cost to buyers and whilst I appreciate that taxes will be required to go up to pay for the government assistance being provided to the wider economy however a suspension of LBTT for the rest of 2020 may be one thing that could be done.  As a minimum the Scottish government should suspend for new build due to ensure current sales pipeline sales continue to completion and maximise the number of furloughed staff that companies return to full-time work after lockdown.


ADS – The Additional Dwelling supplement is a ‘tax’, on top of LBTT, payable by people acquiring a second home.  It is currently 4%.  Suspending this will help move along the Buy-to-let market and assist those who have acquired a new home but have yet to sell their current home.  If you buy a 2nd property because you are still to sell main residence, you pay the ADS and then get a refund if your main home has been sold within 18 months.  Last week on Call Kaye I spoke with someone who had bought a retirement home, spent some time refurbishing before placing their existing home up for sale.  Their one home hadn’t sold and they were now getting close to the 18 month cut off and were very worried.  One immediate measure that would ease such concerns would be to extend this 18 month window by 6 months to account for the lockdown.


New Build – We have heard a lot about the challenges for the self-employed and they disproportionately work in the construction industry (joiners, plumbers, electricians etc).  37% of all self-employed work is in the construction industry and so this is another reason to get things in this sector moving.  Some of the steps above would help however the Scottish government could take some very pro-active steps with the social housing sector.


What used to be called council housing (social housing) is built by Housing Associations (RSLs).  They fund this through a combination of bank funding and Housing Association Grant (HAG).  In the finical year of 2018/19 there were 22,654 new build property starts in Scotland of which 6,532 were Social Housing.  During this period there were roughly 160,000 on social housing waiting lists.  Housing is needed for the many people on waiting lists and social housing needs may well rise due to the economic turmoil created by the virus.  In the last 30 years there has never been a greater need for a concerted social housing new build programme and whilst the government are in the hands of the RSL for this, they can take pro-active steps.


Housing Associations are registered charities and naturally have to be cautious about spend at all times.  The government should therefore engage with the trade body of the industry SFHA and impress upon them the need to get the economy moving and the essential part they can play.  This should then be co-ordinated with increased HAG funding for new builds sites started before the end of the current financial year, bringing forward funding from next year if necessary, to get site started.


These are just some ideas, there will be many many more, but these were driven by the concerns of people I have spoken with in the past few weeks on Call Kaye on BBC Radio Scotland.


To know more about the benefits the housing and construction industry brings to the economy, click on the link below.