“An Englishman’s home is his castle!”*

Source: Reddit

 

That saying has been around for centuries. And unfortunately, quite a lot of the homes we have are centuries old too (even if most aren’t castles).

38% of the UK’s housing stock was built before 1946 – in Europe it’s under 20%.

Amongst the variety of reasons for why we are on our seventh PM in a decade, the core problem remains unchanged.

 

Growth.

And, as the mash potato masterpiece above suggests, homes are part of the problem, but also maybe the solution.

Building new homes creates lots of jobs in planning, materials and construction – as well as all the secondary industries (transport/cafes/hotels) around it. It also makes an economy more flexible, allowing people to move around.

Repairing what’s already there doesn’t have the same effect. Getting the decorator round might get you a classier living room, but the benefits don’t go much wider than that.

Over the past decade, the UK has gone down the repairs route; we now spend 40% more on repairs and maintenance than in 2016, becoming even more acute since COVID. But we’re spending basically the same amount on new builds as we were ten years ago (the post COVID bump was simply a reflection of the COVID dip).

 

UK spending on housing (public and private)

Source: ONS

 

In the UK it’s almost a 50/50 split between new and old spending. For comparison, in Europe it’s 60/40 in favour of new builds, in the US it’s 70/30, and in most Emerging Markets, it’s 80/20.

 We’re fixing castles, instead of building them.

 Shift that spending just a few percentage points in the right direction and it could help the perpetual growth problem.

 Some of this is down to rising interest rates. New buyers can’t quite get the mortgage they could when rates were at zero.

 And to make matters worse, there’s stamp duty. It’s basically the worst a tax can be in terms of a disincentive. Paid in cash, up front, unavoidable – which makes it easy to compare to the other option of renovating.

 

“Why don’t we save the stamp duty and the stress and just repaint/renovate/do an extension?”

 Now, we’ve no idea what decisions Andy Burnham a new PM might prioritise. How to generate growth is surely on the agenda. But if they were prepared to think big, stamp duty is an obvious target, no matter what rates do.

 

Build more castles …

 

*Behaviour also applies in Wales, Scotland and NI!

 

*Disclaimer* This article is for general information only and does not constitute advice. The information is aimed at UK retail clients only.

All information is correct at the time of writing and is subject to change in the future. Data Source 7IM