Factors Affecting UK Construction and Housing Essay

Question 1a

Political factors

UK authorities policies, for illustration, ‘Help to Buy’ strategy and revenue enhancement policies ( i.e. stomp responsibility land revenue enhancement, capital allowances and capital addition revenue enhancement ) affect building and existent estate industry.

The Government’s Help to Buy strategy (Appendix A) , which boosts lodging demand, and a deficiency of available belongingss, have helped force up the inquiring monetary value of the mean place by a record ?2,406 in January 2014 ( Mail-Online 2014 ) . Imbalance between demand and supply of houses is one of the factors that have important effects on lodging monetary values. Monthly National Hosing Survey by Hometrack ( 2013 ) found that over the last six months ( May to November 2013 ) norm lodging demand across all portion of the UK has grown by 10.2 % yet supply has declined by -0.6 % . The belowFigure 1.0indicates that the greatest instability and highest monetary value additions are in London and the South East.

Figure 1.0 – Balance between lifting and falling house monetary values by aggregative part:

(Beginning: Hometrack 2013 )

The crisp rise in UK house monetary values which occurred up to 2008 made higher value belongingss more desirable as investings, exercising farther upward force per unit area on monetary values. This led authorities to revise Stamp Duty Land revenue enhancement rates to 7 % and 15 % on belongingss of over ?1 million and ?2 million severally ( CEM 2013 ) . This disadvantages certain parts of the state, peculiarly London, where belongings monetary values are higher.

Capital allowances are of import to a developer as the sum of revenue enhancement alleviation that is allowed can be a critical factor in finding the viability of a development. Since 2008, UK capital allowances have changed well ; the current allowances are detailed inAppendix B.

At present, non UK occupants are non apt to pay revenue enhancement on any additions in value on 2nd UK belongingss. The belongings revenue enhancement system was cited by The-Guardian ( 2013 ) as a ground for the UK belongings market has grown peculiarly appealing to abroad investors seeking a safe oasis for their hard currency ; about half of the new developments in cardinal are being sold to foreign purchasers.

Economic factors

Economic factors that impacting UK building and existent estate industry include economic growing, involvement rates and exchange rates.

The RICS Construction Market Surveys indicates that UK economy’s public presentation is go oning betterments across building and existent estate sector and all parts of the UK ( RICS 2013 ) . The belowFigure 2.0indicates that the building workloads, employment and net income have been on an upward tendency since 2012.

Figure 2.0 – RICS Construction Market:

(Beginning: RICS 2013 )

RICS ( 2013 ) ’s study highlighted that private house edifice has been boosted by renewed assurance in the building sector due to the beef uping economic recovery. In the commercial sector, RICS ( 2014 ) found that all belongings capital value growing has been positive in each of the last six months. The study forecasts that capital and rental value growing, over 2014, to be in the part of 2.5 % and 2 % severally.

The current low base rate has been remained at 0.5 % by the Bank of England since 2009, has made involvement rates on mortgages are at an historic depression. This have restored assurance to the belongings market and goaded demand. Harmonizing to Bank of England ( 2014 ) , lower involvement rates boost the monetary values of assets such as portions and houses ; higher house monetary values enable bing place proprietors to widen their mortgages in order to finance higher ingestion and higher portion monetary values raise households’ wealth can increase their willingness to pass.

A research carried out by Boyce ( 2013 ) found that there has been an addition in purchasers from other states looking chiefly to purchase belongingss in UK for investing intents, partially due to take down exchange rate. The failing of sterling agencies that aliens can accomplish effectual price reductions on purchase monetary value while geting an plus that will about surely appreciate well over clip ( Boyce 2013 ) . The Battersea Power Station undertaking, for illustration, sold out more than 800 luxury flats for ?675m within yearss ; most of the rich Asiatic investors bought many of the flats on offer in the first stage of the undertaking ( The-Guardian 2013a ) .

Social factors

In the UK, the population has been ageing (Appendix C) . CIOB ( 2013 ) ’s research found that the ageing population has the undermentioned impacts:

  1. The province of the bing stock demands sober consideration, as many places and edifice are unsuitable for and unaccessible to older people. In add-on, new edifices need to be designed to suit all age groups, including the older members of society. This lead the UK authorities to present national scheme, called Lifetime Homes, which is compulsory in 2013, puting out 16 design characteristics that should be incorporated into all new places.
  1. In the building industry, the sum of workers over 60 has increased more than any other age group. The biggest decrease is the sum of workers under 30. The impact is every bit clear as it is worrying: a great trade of cognition and many critical accomplishments are about to be lost and fewer professionals are in line to replace either.

Technology Factors

Appendix A – Help to Buy: place ownership strategies

Aid to Buy equity loans are unfastened to both first-time purchasers and place movers on new-build places worth up to ?600,000.

With a Aid to Buy equity loan:

  • you’ll need to lend at least 5 % of the belongings monetary value as a sedimentation
  • the authorities will give you a loan for up to 20 % of the monetary value
  • you’ll need a mortgage of up to 75 % to cover the remainder


For a belongings worth ?200,000



Cash sedimentation


5 %

Equity loan


20 %

Your mortgage


75 %

If the place in the tabular array above sold for ?210,000, you’d acquire ?168,000 ( 80 % , from your mortgage and the hard currency sedimentation ) and pay back ?42,000 on the loan ( 20 % ) . You’d need to pay off your mortgage with your portion of the money.

( Beginning:GOV.UK 2014 )

Appendix B – Capital Allowances

The current allowances, 2012-2013, are detailed as below:

First twelvemonth allowances:

150 % allowance on land redress alleviation. This is given for intervention and recovery of contaminated land and conveying long term derelict back into usage.

100 % allowance, the Annual Investment Allowance ( AIA ) of ? 25,000. This is collectible for investing in:

  • works and machinery ;
  • commercial edifices in Enterprise Zones ;
  • research and development ;
  • Landlord’s Energy Saving Allowance, available to both non-corporate and corporate landlords for put ining approved energy-saving contraptions in their rented residential belongings
  • Business Premises Renovation Allowances ( since 2007 )

Writing down allowances ( cut downing balance ) :

18 % allowance on works and machinery ( fixtures )

18 % allowance on safety steps at athleticss evidences

8 % insularity of bing edifices

8 % works and machinery, long life assets

Enhanced Capital Allowances ( ECA ) :

The current list of energy salvaging equipment is to be found in the Energy Technology List on the authorities web site www.eca.gov.uk

( Beginning:CEM 2013 )

Appendix C – Ageing population

The salient features for the UK population include:

  • Life anticipation rates at birth continue to lift and presently it is 78 old ages for males and 82 old ages for females.
  • The per centum of the population over 65 old ages of age grew from 15 % in 1984 to 16 % in 2009 – an addition of 1.7 million people. It is forecast to lift to 23 % by 2034.
  • The fastest rise has been in the over 85 age group which has doubled over the last 25 old ages to 1.4 million and it is estimated that this will lift to 3.5 million over the following 25 old ages ( which will account for over 5 % of the population.
  • The figure of centenarians has more than tripled in the last 25 old ages and is forecast to increase eightfold by 2034 to about 90,000 people.

( Beginning:Brown 2010 )


Bank of England ( 2014 ) How Monetary Policy Works hypertext transfer protocol: //www.bankofengland.co.uk/monetarypolicy/Pages/how.aspx

BBC ( 2013 ) Planing regulations on extensions to be relaxed ‘to hike economy’ hypertext transfer protocol: //www.bbc.co.uk/news/uk-politics-19496204

Boyce ( 2013 ) . Foreign investors snap up 70 % of all cardinal London new build places fuelling a rush in monetary values hypertext transfer protocol: //www.thisismoney.co.uk/money/mortgageshome/article-2394704/Foreign-investors-snap-70-new-build-homes-central-London.html

Brown T ( 2010 ) Housing an Aging Population: The Extra Care Solution hypertext transfer protocol: //www.dmu.ac.uk/documents/business-and-law-documents/research/cchr/hm1302007458housinganageingpopulationt.pdf

CEM ( 2013 ) Update of Paper 10247 Property and Tax, ref DEV7AFD

CIOB ( 2013 ) The impact of the ageing population on the building industry hypertext transfer protocol: //www.ciob.org/sites/default/files/CIOB % 20research % 20- % 20The % 20Impact % 20of % 20the % 20Ageing % 20Population % 20on % 20the % 20Construction % 20Industry_0.pdf

Corus ( 2014 ) competitory advantage through merchandise development in building hypertext transfer protocol: //www.thetimes100.co.uk/downloads/corus/corus_9_full.pdf

( GOV.UK 2014 ) Aid to Buy: place ownership schemes https: //www.gov.uk/affordable-home-ownership-schemes/help-to-buy-equity-loans

Hometrack ( 2013 ) Widening supply/ demand spread pushes house monetary values up 0.5 % hypertext transfer protocol: //www.hometrack.co.uk/hpsurvey/documents/HTSurveyNov2013v2_02122013092815.pdf

Mail-Online ( 2014 ) New twelvemonth, new house monetary value roar: Record rises in January as Help to Buy and deficiency of belongingss push inquiring monetary values even higher hypertext transfer protocol: //www.dailymail.co.uk/news/article-2542364/New-year-new-house-price-boom-January-brings-record-rises-Demand-Help-Buy-scheme-lack-properties-push-asking-prices-higher.html

RICS ( 2013 ) RICS UK Construction Market Survey Q4 2013

The-Guardian ( 2013 ) Autumn statement: Abroad investors ‘will be unfazed by new CGT tax’ hypertext transfer protocol: //www.theguardian.com/uk-news/2013/dec/05/autumn-statement-overseas-investors-cgt

The-Guardian ( 2013a ) Battersea Power Station developer sells more than 800 flats for ?675m hypertext transfer protocol: //www.theguardian.com/business/2013/may/20/battersea-power-station-developer-sells-flats