The General Election…
Theresa May caught nearly everyone by surprise when she called a snap general election for 9th June 2017….
The party political machines have all whirred into motion once more, less than a year after the EU referendum, with Conservative, Labour, Liberal Democrats, Ukip, SNP, Plaid Cymru and Green Party candidates all out on the campaign trail, canvassing constituencies for votes.
It’s less than two years since the last general election, in May 2015, when the Conservatives won a surprise (albeit slim) majority. However, things look very different now. The major change has been the vote for Brexit and the subsequent triggering of Article 50, starting the process for Britain’s withdrawal from the EU. But the political landscape also looks very different now in terms of personnel, with the Tories, Labour, Lib Dems, Greens and Ukip all having different leaders from 2015.
In the case of Theresa May, Ukip leader Paul Nuttall and Green Party co-leaders Caroline Lucas and Jonathan Bartley, these leaders are different even from the ones that were campaigning for their respective parties in the EU referendum.
Voters have a lot to contend with, but Brexit is set to dominate proceedings. One of the main reasons for Theresa May calling the election is to increase her mandate for the upcoming Brexit negotiations, with the polls suggesting that the Conservatives are going to win by a landslide. As we all know, polls can be wrong (and in recent history they very much have been), but the current PM is banking on an increased majority to take into the tough negotiating period with the EU.
Property market to showcase its resilience once more
While Brexit is seen by many as the main issue at play, there are plenty of domestic factors that voters will also bear in mind – not least health, social care, education, crime, public services and housing. In recent elections housing has been one of the key issues, and is set to be so again.
But will the upcoming general election have any major impact on the property market? It’s certainly the case that the property market experiences a slowdown, and a few pre-election jitters, as people take a wait and see approach to buying and selling before the result is revealed. However, given the relatively short election campaign, and the fact that it’s not that long ago since the last general election, uncertainty shouldn’t be anywhere near as high as it has been in the past.
What’s more, recent history suggests that the property market is especially resilient to outside forces, able to brush off political and economic uncertainty and take a business as usual approach no matter what the situation is. This is what happened in the lead-up to the 2015 general election and it was also the case before and after the EU referendum. While the property market undeniably took a few hits in the short-term after Britain voted to leave the EU, it soon recovered and any talk of property prices falling off a cliff or a dramatic property crash – of the like not seen since 2008-9 – proved to be fanciful to say the least.
Letting agent fee ban looks unlikely to change
Of course, the different parties have different views on housing – and the UK-wide approach to the property market will depend on who is governing the country after June 8. The government announced plans for a ban on letting agent fees to tenants in last year’s Autumn Statement, a move which was confirmed in the recent Spring Budget. There is currently no suggestion that the Conservatives would row back on these proposals if they were voted back in, despite significant industry opposition. Labour, for their part, have remained quiet on letting agents’ fees, but would be unlikely to reverse the decision – which proved so popular among tenants and in particular younger renters – if the party wins the election.
Labour strong on rental market regulation
Where the two main parties do differ, however, is on rental regulation. Labour promises a ‘consumer rights revolution’ if they come to power, with John Healey, the party’s housing spokesman, insisting that renters will be able to call time on rogue landlords letting dangerous or substandard accommodation. Under Labour, councils would get new powers to license landlords and tough sanctions would be levied on those who seek to bend the rules. Landlords would be consulted with to come up with minimum legal standards, to ensure homes are safe and fit for human habitation.
While Labour would take greater steps to intervene in the rental market, seeking to make it as difficult as possible for bad landlords to slip through the net, the Conservatives are much less keen on blanket regulation and prefer to weed out rogue landlords one by one rather than potentially punishing good, law-abiding landlords with rules and procedures that are too strict and inflexible.
Meanwhile, the phasing out of mortgage interest tax relief, set to be completed by 2020, has only recently been introduced and has now surely reached the point of no return. This, and changes to stamp duty – which have both been designed to make buy-to-let less attractive – would be unlikely to be reversed by whoever is in government.
Stamp duty changes continue to affect transactions
The stamp duty changes last year have certainly had an impact on annual property transactions, with the number of property purchases falling by 40% annually in March 2017. In March last year there was a late rush – a stampede even – from buy-to-let investors buying up property before the stamp duty deadline hit. While there were 102,470 residential sales in March this year, this figure is dwarfed by the 173,860 transactions in March 2016 as people desperately tried to get deals done before April 1.
There is evidence that the property market is flatter than it was a year or so ago, and there are some concerns that another slowdown – and dose of uncertainty – could be brought by the snap general election. However, while the fundamentals of the housing market remain the same – with demand significantly outstripping supply – the property market is likely to remain robust and resilient, with house prices doing much the same.
Fixing the ‘broken’ housing market remains a priority
For most parties, this election will be focused on fixing a ‘broken’ housing market, addressing the supply-demand imbalance and improving the chances of first-time buyers. While first-time buyers are now in a better position than they were a year ago, with tax changes to the buy-to-let sector and various government schemes helping their case, it is still a struggle for many to get on the ladder. It will come down to who is trusted more in voters’ minds on redressing the supply-side crisis and building the required number of new homes.
The Conservatives have long stuck to their pledge to build one million new homes by 2020, including various first-time buyer initiatives and starter home schemes, but doubt has been cast on whether this figure will be reached if current housebuilding figures are not upped considerably in the next few years. The government’s various first-time buyer schemes, which considerably divide opinion, would be kept going by the Conservatives, but it’s less clear if Labour would take a similar approach.
Labour, as you might expect, are keen to push an affordable housing agenda, pointing to the Conservatives’ poor record on housebuilding as one reason why they can’t be trusted when it comes to property. Labour recently released figures that showed Labour-led councils have built more homes than Conservative ones since 2010. Labour leader Jeremy Corbyn has also pledged that the party will build a million new homes over the next five years if elected, with half of these homes council and housing association properties that would be “for rent and totally affordable”.
The Conservatives, though, have accused Labour’s plans of being ‘uncosted’ and said it was they who had a ‘clear plan’ for affordable housing, pointing to figures that show that more council housing has been built under the Conservatives than under the last Labour government and that the number of housing starts is up by three-quarters since 2010.
While the result of the election will clearly have an impact on the property market, it has shown it can function well in times of uncertainty and trouble and that should be the case again. While the fundamentals of the market remain the same, it is unlikely that too much will change – no matter who wins. However, the two main parties have different views on regulation in the rental sector and how best to build enough affordable homes, so the result could prove significant in this respect.
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