Property Blog and News / How will a Conservative government affect the housing market?

2015 Election- David Cameron

How will a Conservative government affect the housing market?

8 May 2015

Author

OnTheMarket
Property Expert

David Cameron will most likely return to Downing Street backed by an increased majority but what did he pledge for housing and what do property experts say?

What were the Conservatives’ pre-election promises for the housing market?

  • They pledge to build 200,000 new homes for first-time buyers under 40 at a 20 per cent discount.
  • The party plans to introduce new Help to Buy ISAs for first-time buyers to help them save for a deposit.
  • They promise to open up the Right to Buy scheme to 1.3 million housing association properties and the money raised will be spent on building new homes.
  • They claim they will put money into regenerating industrial or “brownfield” sites so that 400,000 new homes can be built.
  • They plan to introduce a new £175,000 per person transferable allowance in inheritance tax for main residences.

Adam Challis, head of UK residential research at JLL, is enthusiastic at today’s likely result. He said: “The result of the election provides real clarity and continuity from our perspective. It consolidates and extends what we have been doing in the past five years. For people looking to carry out property transactions, we will now see renewed activity, which we believe will become particularly noticeable during the next autumn selling period.

“We also have a better chance of dealing with Problem Number One, which is building the 200,000 new houses per year that the country needs. The construction business will benefit from that, and so will the whole supply chain.

“The fact is, that for every new home built, somewhere between three and four jobs are created.”

And what key housing market policies which were promised by the other parties have now likely been wiped from the agenda?

  • Labour (and the Liberal Democrats) wanted to introduce a sliding-scale mansion tax on owners of houses worth more than £2million starting at £250 per month for houses under £3million.
  • Labour planned to encourage first-time buyers by abolishing stamp duty for them on property worth up to £300,000. Current stamp duty rates are zero on the first £125,000, two per cent on the next £125,000, five per cent on the next £675,000, 10 per cent on the next £575,000 and 12 per cent on properties above £1.5million.
  • They promised to provide private tenants with a three-year-long guaranteed rent freeze plus a ceiling on rent increases.
  • UKIP promised to give priority for social housing to people with local connections.

“(The result is) good news all round”, is how Trevor Abrahmsohn of London estate agent Glentree, reacted to the election results.

“The predicted departure of non-doms hasn’t happened; if it had, there would have been a huge last-minute exit through the trap door. The fact is that 95 per cent of non-doms pay tax but employ people in this country; employ the working man that Labour talk about so much.

“It seems to me that the Labour Party alienated the business and international community. The fact is, I’ve got £50 million worth of sales waiting to happen. I’ve even got an English buyer who is prepared to pay several million pounds more now for a property now that the Tories have got in.

“We now have in Britain one of the fastest growing economies plus very low inflation, envied by many other European countries. It’s a golden scenario.”

Ed Mead, director of London estate agency Douglas & Gordon, said the election result was “a very bullish outcome for London real estate markets at all price levels”.

He said over the next 12 months he expected “residential assets above £2million to rally by up to 20%”, and that over the next five years capital values in prime London could double.

“Crucially we think there is likely to be a 10-year cross party consensus – as there was between 1997-2008 – that seeks to encourage wealth creation, foreign inward investment, tight public spending and lower taxes.

“This will keep UK monetary policy loose and be a big green light for overseas investors to choose the UK in general and UK real estate assets in particular and to be able to do so with a 10-year horizon.”

Also welcoming the business-as-usual result is Andrew Turner, at the York office of Smiths Gore Estate Agents.

“Despite the normal hiccup in the weeks leading up to the election, the housing market in England has been performing well over the past six months,” he says.

“Its underlying strengths are based on improvements in employment, low interest rates and fixed-rate mortgage deals, Help to Buy, and money starting to filter out of London. I am expecting the market outside London to react well to the election result, and go up a further gear.”

And a sigh of relief has also come from Strutt & Parker estate agents.
“The rental market came under scrutiny with Labour intending to legislate for three-year tenancies and index-linked rate rises and this issue will now likely be shelved,” says its statement.

“In any case, the latter is broadly in line with market practice and demand for the former is questionable. It would be interesting to understand if tenants would wish to be tied into three-year contracts or prefer the flexibility of short term lets – the January ARLA Propertymark report stated that average tenancies currently sit at 18 months.”

Although the political make-up of Westminster over the next five years is now clear, whether David Cameron and his party stick to their pledges is, of course, the factor which remains to be seen.

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