Forecasting the UK housing market for the year 2023
Reforming Real Estate Investment Trusts
Starting in April, a REIT only needs to own a single commercial property with a value of at least £20 million to qualify as a real estate investment trust (REIT). Alterations to the "development rule" are also on the horizon (though the nature of these alterations is unclear at this time).
To help achieve the government's goal of making the United Kingdom the "world's premier financial center for sustainable finance," an updated Green Finance Strategy will be released in the first quarter of 2023 as part of the same package of "Edinburgh Reforms" announced by the chancellor in December "to drive growth and competitiveness in the financial services sector."
Although the idea of issuing tradable tokens in a real estate asset or rights related to that asset is gaining traction, the current legal framework governing tokenized real estate is unclear, and there is a general lack of awareness of the asset class.
However, the decentralized block chain ledger has enormous potential due to its security, transparency, and efficiency. Real estate investment can benefit greatly from the ability to fractionalize a previously illiquid asset with a previously limited pool of wealthy purchasers, so overcoming the obstacles to adoption is a worthwhile endeavor.
As part of the Financial Services and Markets Bill 2022, the first "Financial Market Infrastructure Sandbox" will likely be released in 2023, giving participants the chance to test out new technologies in a simulated regulatory setting. Tokenized real estate may become more popular in the future if this paves the way for the modification of the legislative framework to accommodate trading facilities based on distributed ledger technology and other innovations.
The owners of retail space on the high street should be aware that local governments will soon have the authority to hold mandatory rental auctions of certain vacant retail spaces under Part 8 of the Levelling-up and Regeneration Bill, which is currently making its way through Parliament.
If necessary, the local authority will be deemed to have the consent of any superior landlords or mortgagees to any actions it takes to let the premises, including the granting of rights over land outside the premises. Unfortunately, these leases will not be covered by the 1954 Act.
In order for the premises to be eligible for auction, the local government must have designated the area as a "designated high street" or "town center" due to its economic significance. A local land charge is how this will be recorded. The property must have been vacant for at least a year, or 366 days, within the preceding two years, and the local authority must agree that using the property for a high-street purpose would be good for the economy, society, or environment. Before going to auction, the local government must give the property owner advance notice and the chance to rent the building out (on reasonable terms).
While enabling legislation is expected in 2023, it will take some time for regulators to work out the kinks.
Tenant Protection Act
The long-awaited "New Deal" promising "quality affordability and fairness" for the 4.4 million households that rent from private landlords was introduced in June 2022 with the publication of the government's white paper "A Fairer Private Rented Sector" and related documents.
As a result, we can expect to see the Renter's Reform agenda advanced this year, which could lead to the elimination of "no-fault" evictions, the development of a cutting-edge digital property portal, the expansion of the Decent Homes Standard into the private rented sector, and the establishment of a new Ombudsman scheme to better protect tenants.
Predicted Housing Production
The government's goal of constructing 300,000 new homes annually has been reduced to the status of a "starting point with new flexibilities to reflect local circumstances" in response to lobbying from the opposition.
Quality Assurance Regulations for Brand-New Houses
By the end of the year 2022, all home builders were supposed to have signed up with the New Homes Quality Code. Under the Building Safety Act 2022, the New Homes Ombudsman and the associated scheme were established to give homeowners a place to go to resolve disputes with architects, contractors, and other parties involved in the construction of their new homes. The new, more consumer-friendly policy will take effect this year.
The Expansion Rates
Councils will have new authority to impose sanctions, including the power to halt planning propositions by developers who have "failed to deliver," thanks to the Levelling-up and Regeneration Bill, which is currently making its way through Parliament and is expected to be passed this year. We're eager for you to elaborate.
Examining by the CMA (Competition and Markets Authority)
As a result of a formal request made by the Secretary of State for Leveling Up, Housing and Communities, a CMA market study of the home construction industry may be conducted. Early in 2023, we can anticipate a report from the CMA.
Leasehold enactment changes
Many see the June 2018 elimination of ground rents for new long-leases as just the beginning of a series of necessary reforms to long-leaseholds; the (non-retrospective) ground rent regime will be fully implemented on April 1, 2023, when the transition period for retirement properties ends.
The government is currently evaluating the feedback it received on proposals to increase the number of people who have the right to enfranchisement (the ability to purchase the freehold of one's building or to extend one's lease) and the number of people who have the ability to manage their own building. The new rules would make it easier for leaseholders in buildings with as much as 50 percent commercial space to acquire freeholds or establish rights of management, and would streamline the current system.
It is unclear whether Parliament will have time for these and other important modernizations in 2023, but a report from the Law Commission in 2020 lays out a path forward for them, including the elimination of leasehold homes and the revitalization of common hold.
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