By Chris Taylor, Chief Executive, Titlesolv
Pollsters are currently predicting that either the Conservative or the Labour Party will be forced into a minority Government, compromising on their manifesto promises or into a coalition agreement in order to form a Government. It is important for the property community that we take a closer look at each party’s proposals for the housing market. The increase in housing stock, ‘right to buy’ extensions, and new property tax regimes to engineer social change are all contentious issues which have been debated on the campaign trail.
The Conservative manifesto promises the delivery of 275,000 affordable homes by 2020, a Right to Buy initiative to all Housing Association tenants, the extension of the Help to Buy Equity Loan scheme to 2020 and the creation of 200,000 Starter Homes, to be sold at a 20 per cent discount exclusively to first time buyers aged under 40. By contrast Labour, promises to deliver 200,000 new homes by 2020 by forcing banks to reinvest the money saved in existing ‘Help to Buy’ ISAs. The party intends to promote the building of new affordable homes by prioritising capital investment for housing, reforming the council house financing system and giving local authorities extra powers to reduce the number of empty homes, including introducing a higher council tax charge for properties that are unoccupied in the long-term. Under a Labour government, first-time buyers purchasing homes worth less than £300,000 would also benefit from a three year stamp duty holiday. For the 11 million private rented tenants across the UK, Labour proposed to introduce legislation to increase the minimum term of an Assured Shorthold tenancy to three years and a rent rise ceiling pegged to the Consumer Price Index.
On a review of all manifesto commitments The London School of Economics has concluded that none of the parties has produced a detailed financial analysis of how their supply targets will be met, with one expert on the review panel even saying that the numbers appear to have been “plucked out of thin air anyway”. The Conservative Party’s policies are reflective of their core belief that home ownership enables upward social mobility; the delivery of their objectives will undoubtedly increase property transaction volumes and mortgage lending which is a positive for property professionals. However, their proposed Housing Association Right to Buy Scheme has been heavily criticised for threatening to return us to the inequities and inefficiencies of the Local Authority Right to Buy Scheme. More importantly, the concept may potentially undermine the fundamental premise of Housing Associations to function as corporate entities. The impact may well be reduced fee earning work at the high end as the flow of work being generated from new acquisitions is reduced.
The Labour Party’s policies also promote housing stock increase but they go beyond this to analyse and suggest solutions within Local Authority and funding regimes to address the practical difficulties experienced in relation to current stock levels. However, the Labour objectives for protecting private tenants has been criticised in some circles for discouraging the Buy to Let sector. This means lower volumes of Buy to Let investment which could have an adverse effect on the market if private equity investment in the volume Buy to Let portfolios is withdrawn from the market due to increased risks and lower margins. Labour’s stamp duty tax freeze has also been criticised by analysts who say that buyers will merely divert the money not required for the tax payment towards increasing their overall house purchasing budget, thereby fuelling bidding wars and pushing house prices up.
There are positives and negatives embedded within each manifesto and although the housing crisis is at the heart of the social fabric, there is nothing which is particularly controversial in the manifestos. The property market has been showing signs of a return to normal transaction levels. Property solicitors and bankers will undoubtedly review the manifesto promises from the perspective of how these impact on transaction volumes overall. Foremost in their minds will be having come this far out a property based recession, the policies of our next Government should not at any costs reverse the positive trends which are being experienced because all players in the industry, from funders, to developers to sellers, shouldered the burden via writes offs and realisms.
Titlesolv is the trading name of London & European Title Insurance Services Ltd, authorised and regulated by the Financial Conduct Authority.