‘Investment zones already propping up house prices’

The government’s ‘investment zone’ policy is already sustaining house prices in regions likely to benefit from the scheme like the Midlands and the North, according to David Hannah, group chairman of Cornerstone Tax.

Three weeks ago Chancellor Jeremy Hunt pledged to introduce 12 investment zones with tax incentives via £80m of funding in previously underfunded regions, which could include the East Midlands, Greater Manchester, Liverpool, the North East, South Yorkshire, the Tees Valley, the West Midlands and West Yorkshire.

The zones are set to focus on technology, creative industries, life sciences, advanced manufacturing and the green sector.

David Hannah of Cornerstone Tax said: “The announcement from the Chancellor… is already likely a factor which is keeping property prices buoyant in these regions.

“There has been a concerted effort from the government to spread the wealth evenly throughout the UK and the introduction of these investment zones should increase the amount of jobs and businesses in these regions which will inevitably effect property prices.

“Not to mention providing more job opportunities for those who are currently unemployed causing a rise in wages and potential property buyers. The Chancellor did outline employment as a priority in the announcement and specifically a measure of having apprenticeships available in the skilled trades for over 50-year-olds.

“Naturally, this could positively affect the chronic undersupply of properties in the housing market if we have more skilled workers that are able to work in the construction sector.

“This is a good measure that helps address skills shortages, which are currently affecting 83% of businesses within the construction industry, according to research by recruitment specialist Search Consultancy.

“I think anything that they can do to expand the construction sector is welcomed – it is a supply crisis that we are seeing in the property market, not a demand crisis. They are focusing on getting workers to return back to work and that should inevitably speed up construction.”

House prices have fallen for seven consecutive months, with the latest reduction being by 0.8% month-on-month in February, Nationwide’s house price index shows.

However the West Midlands is bucking the general trend, where annual house price growth still stands at 1.4% – bringing the average price to £236,476.

Similarly there is still positive price growth in Northern Ireland (1.3%), the South West (0.5%) and the East Midlands (0.5%) – admittedly at a fairly low level.

Falling house prices can be attributed to rising mortgage rates, high inflation and the surging cost of energy following the Russian invasion of Ukraine.

The investment zones policy was originally introduced by the disastrous Liz Truss-Kwasi Kwarteng administration, however Hunt opted to keep the policy at an arguably watered down scale.