Tuesday, 12 May 2015

UK Election 2015: Reactions from the property industry

Last week's election saw a victory for the Conservative party - an outcome unpredicted by major news outlets, pollsters and even the parties themselves - with David Cameron set to remain in 10 Downing Street for another term without needing to form a coalition government. 

A number of changes in behaviour on both sides of the property market are easily visible, with sales in some areas of the market already starting to return to pre-election levels, and foreign investors regaining interest now that potential legislative changes no longer pose a threat to their acquisition of assets.

Lucy morton, Director of JLL/W.A.Ellis 

We've been paying close attention to events as they've unfolded, and have gathered the most interesting changes happening now and planned for the future of this government in case you missed them.

Mansion Tax no longer a threat

A conservative government is highly unlikely to introduce a mansion tax on properties valued over £2 million. Previously considered by both Labour and the Liberal Democrats but staved off by Cameron during the coalition period, this tax was one of the primary reasons both buyers and sellers were reluctant to market property in the first quarter of 2015

Jackson-Stops & Staff

As exit polls began to show a clear conservative win, a large number of estate agents in London and the Home Counties saw a surge in interest, especially in prime properties. This return to some form of normality is far faster than had been anticipated, with predictions stating that it would take months before the market rebounded. It's too early to provide figures for the market as a whole, but anecdotal evidence from our customers and a spike in the share price of companies in the industry strongly suggests a positive impact on their businesses that is expected to continue.

Richard Davies, Chestertons’ Head of Residential shared the following words which summed up the thoughts of many within the industry:
“The prime residential markets in London will certainly welcome the clarity this result brings. Many clients in higher-value properties will have been making contingencies for a Mansion Tax coming in, while landlords will also have been scratching their heads at the raft of changes Labour would have implemented. Now the fog of uncertainty has lifted and the way ahead is clear; home-owners and landlords alike can look forward to sustained growth and dynamism returning to the market."  - Full article 

Issues to be addressed

Many within the industry do feel that there are still a number of issues that need to be addressed through legislative changes and action by government - namely an increase in the number of available houses and a more transparent rental market to ensure long-term sustainable growth. While the party has avoided using the term "housing crisis", there is a lot of pressure from a large section of the electorate to provide reforms and solutions to the issues faced by many when attempting to join and stay on the market.

The new conservative government will almost definitely introduce policies that work to move individuals from the public to the private sectors - and this is as true for the residential sector as it is for other large markets. It's already clear that the government wishes to reduce the number of individuals who are living in state-subsidised accommodation through a number of new policies: 

200,000 new homes by 2020

The government has promised to provide 200,000 starter homes by 2020 at 20-40% discount, while regulatory changes to the rental market have yet to be discussed at length. This is likely to have an impact on the housing market in some fashion, and it will be interesting to see how these new homes are introduced to the market - and the influence their introduction has on property values.

Dominic Agace, CEO of Winkworth Estates stated a desire to see these changes taking place:
 “The Tories need to ensure that more houses get built. I would like to see them making moves to get homes built on brownfield sites that they have identified."

Rental caps & tenant protection

The rental sector has been less affected by the sluggish first quarter of 2015, with Foxtons reporting 6% growth:
"The growth in residential lettings has continued the momentum seen in the last two quarters and is broadly in line with the long term growth trend of 6%" - Full article [PDF] 

Yet there is still room for change, and discussions of new policies have been debated by all parties to some extent in the run-up to last week's election.

Rental caps are unlikely to be seen under this government, with the Conservative party more likely to take a more soft-touch approach to managing the rental sector. The primary focus of Cameron's cabinet will likely be to increase the number of people joining the property ladder throughout the course of the next political term - with any major changes focussing on protecting tenants from "rogue landlords" and ensuring that tenants from outside of the EEA have the right to live and work in the UK.

The primary goal of the party seems to be to improve the quality of rental stock by increasing landlord responsibilities and accountability; increasing the professionalisation of the rental sector starting with individual landlords and investors. 

We've already seen the introduction of new policy tightening regulations on fire safety and capital gains tax, and it's likely that these trends will continue over the next half-decade.

Help to Buy ISAs & Right to buy

Cameron's party were vocal in their support of help to buy ISAs, introduced in March and designed to help first time buyers afford to purchase their first homes [PDF]. It's unlikely that there will be many large changes to the current Help to Buy system due to how recently it was introduced, but there is likely to be a growth in the number of buyers over the next period as a result of this policy.

The Conservative party also strongly support Right to Buy - giving council house tenants the ability to purchase their home after a set period at discount. Currently tenants can purchase their homes at discount once specific conditions are met, but it's likely that the conditions will be relaxed in favour of encouraging those in social and supported housing to move towards property ownership.

The government is also vocal about working to reduce the time families have to spend waiting for social housing - with over 1.8 million individuals currently on the list. This will likely be through a relaxation of regulation on housing associations and a change in policy to tackle the number of abandoned and empty homes in the country.

The future

While nothing is set in stone at this early period, it's clear that change will affect the property market in the coming months. An increase in potential and future buyers is obviously one key target for the party, and it's important to factor in how this will affect property sales and investment growth.

These changes are also not expected to be exclusive to London, with Lucian Cook from Savills stating:
"The overall London market is expected to experience a renewed ripple effect into the markets beyond the capital, as those relocating from London find it easier to sell their existing home and take advantage of the price differentials with the rest of the country." Full article

In the past week we've experienced a surge in enquiries across all services - from home staging to replenishment - a sure sign for us that market confidence is back on the rise in time for summer.

One thing is clear - we can expect to see a surge in market activity, with far more homes - especially prime homes valued over £2 million - entering the market. With this increased competition it's important to plan ahead to ensure performance of properties, as the influx of new property will likely not be matched by demand in the immediate short term.

Whichever policies end up being implemented and to what extent remains to be seen, but should you require advice our team have over 30 years' combined experience in the sector and will be more than happy to provide valuable advice when planning the future of your investments.