British voters go to the polls today with housing is a key election issue.
All major parties have promised policies to address the chronic housing shortage across the country, with Labour, the Conservatives, Liberal Democrats and the Green Party all having pledged to build hundreds of thousands of new homes to balance demand.
As they fight to secure votes in the election, how will housing policies affect the property market, and which party rests in the best interests of British property developers and real estate agents?
There are several key housing schemes offered by the major parties that will have direct as well as ‘knock on’ effects on the property industry. Direct policies are targeting ‘Generation Rent’ in the private rental and social housing sector, as well as addressing the current market stacked against buyers, and implementing high property taxations to fund other industries.
Labour and ‘Generation Rent’
Some 11 million people rent privately, a figure that is now more than people in social housing and is a symptom of soaring house prices, councils selling off properties and the government’s failure to provide more homes for a growing population.
Labour has presented a proposal that favours renters and hurts landlords and estate agents. New legislation would introduce three-year tenancy agreements to combat insecure rental agreements; financially penalise landlords who fail to maintain properties by forfeiting tax relief; cap rent at the rate of inflation, which is currently sitting at 0 percent; and ban letting agent fees, which would cost estate agents an average of £600.
The Green Party is also in support of capping rent and banning letting fees, and while the policies are popular with renters, they spell bad news for letting agents. Long-term tenants will likely stagnate the rental agency industry, and capped rent will limit income growth for management services.
The Chairman of the Residential Landlords Association claims that 3 out of 5 landlords are liable to leave the market if rent controls are introduced, and prospective landlords will be discouraged from entering the market at all.
First Time Buyers now account for a third of all house sales and are a priority for all parties.
Both the Conservatives and Labour have pledged to help the British people buy their own homes. Implementing programmes that allow more people onto the property ladder aims to stimulate a flagging market. Labour’s proposal to abolish stamp duty on homes worth up to £300,000 for first-time buyers will amplify the stamp duty reforms introduced last year, which were forecast to stoke demand and push up property prices over the coming year.
Meanwhile, the Conservatives are extending the Right-to-Buy scheme of the 1980s and augmenting its Help-to-Buy scheme by introducing ISA accounts exclusively for first-time buyers in a bid to meet David Cameron’s pre-election pledge to offer 1.3 million poorer families the opportunity to buy their own homes.
The scheme has purportedly helped more than 80,000 people to buy new homes since its inception in 2013, still well behind the number needed to keep pace with population growth.
Both parties’ policies have been criticised for stimulating market activity without encouraging the building of more homes, leading to spiralling home prices and a bullish market. Although Labour and the Conservatives have both promised to build 200,000 new homes a year by 2020 to stabilise the market, critics have lambasted the parties for addressing the symptoms before fixing the cause.
While the schemes portend potential trouble for buyers, estate agents can look forward to an invigorated 2015.
The Green Party wants to abolish Right to Buy and Help to Buy altogether, transferring the power away from buyers and into council hands; encouraging homeowners unable to meet mortgage repayments to transfer ownership to the council, who would build additional houses or buy them on the open market.
The Liberal Democrats offer the least attractive programme for estate agents with their pledge to create 30,000 Rent-to-Own homes where tenants would pay off over 30 years rather than buy outright.
The mansion tax has severe implications for the economy
Labour’s mansion tax, seconded by the Liberal Democrats, has been heavily criticised by property experts who warn that the tax will detrimentally affect the British economy, with rippling repercussions throughout the entire property market.
The tax, which places a levy on high-value properties, will hurt overseas investments, shaving off a sizeable chunk of the U.K.’s economy. The proposed tax has already caused a slump in property demand ahead of the May 7 general election, a trend that has not gone unnoticed by some real estate agents.
High value property owners, residential developers and overseas buyers will be hit hardest, turning potential buyers into renters, and claiming unwitting owners of modest homes in pricey areas.
Executive Director at Douglas & Gordon, Ed Mead, claimed the property sector accounts for about 10 percent of the economy and warned that choking off demand and activity at the top will have a negative ‘knock on’ effect throughout the sector.
Rising property prices are nudging more and more properties over the £2 million threshold.
Knight Frank has purported that such properties’ value will plummet to below the new tax threshold, compromising estate agent commission and throwing the market structure into disarray. Asset-rich, cash-poor home owners who are allowed to suspend their payments until they sell, will likely avoid selling all together to escape the tax, stagnating the top end of the market and driving up prices and competition on lower end properties.
All parties are mounting a major house-building programme across the U.K.
The Conservatives and Labour have pledged to build 200,000 homes a year, while the Liberal Democrats are aiming for 300,000 homes and 5 new garden cities by 2020. The Green Party take the cake with 500,000 new social homes for rent, funded by scrapping buy-to-let mortgage interest tax allowance.
Fresh stock hopes to reinvigorate the property market with hundreds of thousands of affordable homes, stemming the housing crisis that has plagued the U.K. for decades. While the number of homes built will continue to fall behind population growth, these targets aim to stabilise the housing shortage, and amend the deep structural problems within the market.
Except for the Greens, these new homes will allow for thousands of people to enter the property market, meaning more business for estate agents.
So who gets your vote?
Laying bare party policies, Conservative housing policies look to be, overall, more beneficial for the industry. With Labour’s mansion tax threatening to wipe thousands off the value of property and further squeeze an already pinched middle class, the potential for provoking massive market changes does not sit well with many estate agents.
The Liberal Democrats’ support for the mansion tax, coupled with their proposed rent-to-buy and increased taxes will likely garner animosity within the real estate industry, while the Green Party’s strong social focus regarding housing offers little benefit to real estate agents.
All of the proposed policies are liable to fall flat without first addressing the severe housing shortage across the kingdom.
Whoever wins the election will need to ensure that building more affordable homes is top of their agenda in order to address the housing crisis and galvanise the property industry.
Andrew Batt, International Group Editor of PropertyGuru Group, wrote this story. To contact him about this or other stories email andrew@propertyguru.com.sg
