What effect will a new government have on the residential property market?
The announcement of the general election appears to have led the housing market into yet another period of uncertainty, with Rightmove reporting a 1% decline in average house prices in November. In this article, Jessica Scarlett explores what effect a new government could mean for the residential property market, based on the manifesto promises of the major parties.
In light of the growing number of bodies who are lobbying for reform, it seems a shame that none of the main parties have made major proposals for amending SDLT.
The Conservative Party's pledge to implement a new 3% surcharge for overseas investors has received a mixed response from the property industry. The promise was supposed to reduce competition for homes and represent a positive change for domestic buyers. However, it has been heavily criticised for its potential implications for the high-end housing market, particularly in London.
Both the Labour Party and the Liberal Democrats have made similar promises. The Labour Party has pledged to introduce a levy on overseas companies buying housing, and give local people first dibs on new builds. The Liberal Democrats want to introduce a stamp duty surcharge on overseas residents.
While the Labour Party and the Liberal Democrats appear to be taking a slightly milder approach, all the major parties seem to be heading in the same direction.
The Conservative Party appears to have gone quiet on its expected domestic SDLT reform. Long-awaited promises by the party to reduce the threshold from £125,000 to £500,000 and to cut the top SDLT rate from 12% to 7% have not appeared in their manifesto.
Labour says it will make no change to existing SDLT thresholds. It has, however, pledged a second homes tax to apply to additional homes.
The Liberal Democrats want to link stamp duty to the energy efficiency of the property, but few further details have been released.
In light of the growing number of bodies who are lobbying for reform, it seems a shame that none of the main parties have made major proposals for amending SDLT. Purplebricks and consultancy firm Glenigan have reported that a substantial increase in the threshold before SDLT becomes payable could trigger an additional 131,000 house completions per year, as well as an average saving of £4,300 for buyers.
Perhaps some of the most significant variations in policies are those aimed at landlords.
Labour has proposed a large number of radical changes, which will have a huge effect on the private rental sector. Labour has pledged to introduce a rent cap and give councils the powers and funding to buy back homes from private landlords. In a period in which demand for private rental sector homes is outstripping supply, such measures will almost certainly cause the sector to shrink.
Like Labour, the Conservatives have also pledged to continue with their plans to abolish evictions under s21 of the Housing Act 1988 (s21 evictions). While this proposed policy has received some backlash among landlords, (who want to retain the freedom to evict their tenants once the fixed term contract has come to an end), it remains unclear how much impact the legislation will have. In general, landlords are unlikely to serve section 21 notices on tenants who pay their rent on time and comply with the terms of the lease. Plus, landlords will still have recourse to evict tenants if they have good reasons for bringing a tenancy to an end.
The Liberal Democrats' manifesto pledges are a mixed bag for landlords. Positive steps for landlords include plans to support younger tenants in accessing rented housing with a deposit loan scheme. However, the party's plans for a blanket licensing scheme for landlords are costly and time consuming. While the Liberal Democrats have not chosen the abolish s21 evictions, they have proposed longer, three-year tenancies with an inflation-linked annual rent increase built in, to give tenants security and limit rent hikes.
Finally, despite all the reforms promised by each of the parties, the ongoing and somewhat tiresome issue of Brexit will still have a major effect on the housing market.
In the worst-case scenario, the Conservatives' pledge to "get Brexit done" could lead to a crash in the market. In 2018, a series of Bank of England stress-tests pointed to property prices dropping by as much as 33% over three years as a result of a "worst-case" no deal outcome. While this may signal a disaster for homeowners and landlords, first-time buyers may have the opportunity they have been looking for. A weaker sterling could also turn the UK into an off-shore investor's delight, especially as the country will continue to be recognised as safe and transparent.
Labour's policy of renegotiating the deal could lead to even more years of uncertainty and continue to stall the market.
As the EU has made it clear that they will not renegotiate the terms of the deal, a deal in any event could arguably instil a renewed sense of confidence across the board.
Finally, the Liberal Democrats' policy to scrap Article 50 would eradicate some of the uncertainty. However, it would be naïve to expect the question of the UK's departure from the EU to be swept under the rug.
Overall, it appears as though our property market will remain in somewhat stormy waters for the foreseeable future. Although the general election will have a huge impact on the way the property market goes, the property market will continue, as it always has, to move in cycles. With all the uncertainty either way, the best advice would be to "keep calm and carry on".