The General Election and the Housing Market
Demand still exceeds supply in the property market, indicating that house building will be at the forefront of this year’s general election.
For the major parties, housing will have a huge impact on the result. They have already outlined some key points ahead of 7th May.
The Conservatives have vowed to deliver 100,000 new homes to first time buyers if they win the election. These would come at a 20% discount; preference would be given to UK residents under 40-years-old, over buy-to-let landlords or investors.
Labour says that they will double the amount of first time buyers in the next ten years. They also aim to build 200,000 new homes every year, including a high number of social and local authority housing.
The Liberal Democrats have gone even further, planning to build 300,000 new homes per year. Some of these would be set aside for social housing, and some would form part of new garden cities, built along the proposed rail line between Oxford and Cambridge.
Although the amount of first time buyers has begun to rise again, there is no doubt that the last few years have seen the housing ladder move out of reach for young people.
The Office for National Statistics (OFT) have revealed that average house prices in London stand at £428,000 and £308,000 in the South East, but much lower in other areas of the country: £169,000 in Wales, £154,000 in the North East, and £136,000 in Northern Ireland.1
The General Election and the Housing Market
The gap is also widening. In 1983, the percentage difference between highest and lowest value areas was 56%, however now it has grown to 68.3%.1
It is no surprise that many people in the UK are choosing to rent rather than buy, and the figure is rising. Research by lobby group Generation Rent shows that, on Election Day, MPs in 100 seats will represent more renters than owner-occupiers.1
With this being the case, Labour aims to increase tenant security by launching fixed three-year tenancies, and also prevent landlords increasing rent more than once a year, and to ensure these raises stay within statutory guidelines.
The Conservatives believe that this will limit supply of accommodation, by causing landlords to become wary of renting out properties.
They think that it will be better to improve the economy generally, thus creating more jobs and making tax cuts possible.
The Liberal Democrats support the policy of increasing supply, by not only building more homes for sale, but properties that local authorities and other organisations can rent out.
Regardless of the outcome of the election, the major parties all agree that more houses need to be built. Estate agents share this view, as they report that demand is far surpassing supply.
Investors and buy-to-let landlords will be pleased, as their rental income will cover mortgage repayments, and the value of the property should increase, more so in London and the South East.
Vendors in the south will also be happy, as asking prices continue to rise. However, there is a threat of mansion tax that would be imposed on homes over £2m. This is part of the manifesto for Labour and the Liberal Democrats. Agents have claimed that homeowners in this price range are either trying to sell quickly now, or are holding off until after the election.
Equally, buyers of properties on the lower end of the scale will see a decrease in the amount of Stamp Duty they must pay.
The new system, brought in in December, means that the first £125,000 of the sale price is now exempt from Stamp Duty. Before, a 1% rate applied. For example, if a home cost £185,000, the vendor would pay £1,850 in Stamp Duty. Now, the rate has been increased to 2%, but this rate only comes into force after the £125,000 mark.
Stamp Duty on a £185,000 home is now charged at a 2% rate of £60,000; just £1,200 against the previous £1,850. Over £250,000, 5% Stamp Duty applies, above £925,000 it is 10%, and over £1.5m the Duty is 12%.
In Scotland, the new rates will see a 92% increase in Stamp Duty for a £900,000 property.
For everyone: tenants, owner-occupiers, landlords, investors, developers… housing will be on our minds come Election Day.
1 http://blog.onthemarket.com/content/general-election-2015-will-mean-property-market-2/