Election – Impact on the property market

As widely predicted, Labour are now in power. So, what does this mean for the property market? We all know politicians’ propensity for porky pies, so what is delivered vs what was pledged remains to be seen. For now, let’s look at the key pledges and what this might mean.

Currently: First time buyers don’t pay stamp duty on properties worth up to £425,000 and a flat rate of 5% of any amount between £425,001 and £625,000.

Impact: It will be more costly for first time buyers to get on the property ladder.

Who benefits: The government.

Currently: Overseas buyers pay a 2% surcharge on stamp duty

Proposed: This will rise to 3%

What are they trying to achieve: Additional tax revenue. Capitalising on overseas buyers investing in the UK property market.

Impact: Unlikely to have any notable impact for overseas or the UK property market.

Who benefits: The government.

Currently: No VAT

Proposed: 20% VAT

What are they trying to achieve: Additional tax revenue, targeting those with higher incomes/wealth

Impact: It’s estimated that 40,000 to 100,000 children will switch from private to state schools* There is already a shortage of places in state schools, so this could cause challenges. Currently, properties in an Outstanding school catchment carry an estimated 14.5% premium**, this will likely rise as parents compete for the best state schools. Conversely, will parents pay stamp duty and moving costs out of one hand to save money on school fees with the other? Debatable. However, I feel it’s inevitable property values in Outstanding school catchment areas will rise, potentially widening the already growing rich/poor divide in property ownership and beyond.

Who benefits: The government.

Current: The Tories pledged to build 300,000 new homes a year. Over the last 4 years this has averaged at 234,000 a year.

Proposed: 1.5 million new homes over the next 5 years. Flexibility will be given to build on green belt land where it is deemed sensible.

What are they trying to achieve: Address the housing shortage, especially for affordable homes.

Impact: This should help more first-time buyers on to the property ladder.

Who benefits: All home buyers. More first-time buyers mean more movement across the whole market.

Current: Mortgage guarantee scheme offering government backed mortgages up to 95% LTV (loan to value) (due to expire in 2025). 43,000 mortgages were taken out using this scheme between April 2021 and December 2023.

Proposed: Freedom to Buy, the same as above, but made permanent.

What are they trying to achieve: To help 80,000 young people on to the housing ladder within 4 years.

Impact: As this is similar to the scheme currently running, the current impact will continue.

Who benefits: First time buyers and lower income workers

Current: Landlords can give tenants notice using Section 21, allowing them to reclaim their property. The Tories planned to ban these as part of their Renters Reform Bill, however this was shelved. They also proposed a minimum EPC rating of C for all rental properties (except listed buildings).

Proposed: An immediate ban on Section 21 evictions and a cap on rental prices and implementation of the minimum EPC requirement.

What are they trying to achieve: More protection for tenants to have longevity in their rental homes and cheaper utility bills resulting from increased energy efficiency.

Impact: Some landlords will leave the market for fear of losing control of their rental property. After the end of mortgage tax relief and then the implications of the Renters Reform Bill, it has become so hard for landlords to make money, or even cover costs, that they have been leaving the market in droves. This has caused a chronic shortage of rental properties which has driven up rental prices, making it even harder for renters to save for a mortgage .Furthermore, given the government have sold more properties than they’ve built for years and now rely on the private rented sector, coupled with a rising population, the problem is getting worse by the day.

Who benefits: No-one.

Current: None

Proposed: Angela Rayner has proposed offering locals ‘first dibs’ on new housing developments, to prevent investors snapping them up, sometimes before they are publicly advertised.

What are they trying to achieve: To make it easier for first time buyers

Impact: This will give owner occupiers a fairer opportunity to buy suitable properties.

Who benefits: Locals will have more choice which should help them on to the property ladder, in their local area.

There are good and bad points to many of these proposed changes, which could well become like a jigsaw puzzle creating a big picture that shapes the property market in the next few years. Until we know what will actually be implemented, and when, we can’t know the impact. Watch this space!

* The Telegraph

** Property Reporter

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