I’ve been taking a closer look at the main party manifestos to discover what they could mean for the UK residential property market.
Everyone agrees that the seven years of recession and banking upheaval have left the sector in an unacceptable mess, with the prospects of home ownership all-but disappearing for an entire generation of young adults. There has been a short-fall in new home building, with 9 million people living in private rented accommodation (that’s 25 per cent of all households in London) . By contrast, huge numbers of people over fifty have become more affluent than ever on the proceeds of a lifetime of soaring house prices** . They are living longer and staying healthier, locking-up vast swathes of the nation’s owner-occupier stock. The population is swelling too, to increase the pressure even more.
The Tories are proposing;
1. Extending the Help-to-Buy Equity Loan Scheme to help young people afford deposits
2. Releasing huge amounts of public sector owned brownfield land for private house building
3. Putting £1 billion into the Build-to-Rent fund to stimulate the new build rental sector
4. Building 275,000 affordable new homes in the next five years (about half of the predicted demand).
Labour is proposing;
1. Imposing Mansion Tax
2. Building 200,000 affordable new homes a year, many in new towns and cities, which will not be available to private investors
3. Doubling the number of first-time-buyers by 2015
4. Introducing three-year fixed tenancy agreements (simple rent-control), which won’t be good news for the county’s 1.63 million buy-to-let landlords, two-thirds of whom say they would invest elsewhere
5. Curb letting agents’ fees.
With the polls pointing to a neck-and-neck finish between the two main parties, and possible coalition partners sitting firmly on the fence, it’s a difficult call for those interested in acquiring residential properties as investments.
In broad brush terms, with demand outstripping supply by such a large margin, it would be easy to assume that any residential property investment is a sure-fire bet. However, Labour’s three-year fixed tenancy proposal could leave Landlords hundreds of pounds a year worse off , and is dramatically dampening their enthusiasm.
And my view?
Residential property in the UK has been a sound investment for the past 150 years (taking into account three blips, caused by two world wars and the other by the ‘twenties economic crash). This growth has continued irrespective of the interference with market forces and minor price skewing by the ruling political parties.
Hundreds of thousands more people living in Britain will need roofs over their heads in the coming five-year parliamentary term.
Next month’s vote isn’t going to unblock that logjam, whoever prevails. There will be plenty of opportunities to make a fair return on investment by supplying this basic human need, whether the next government tackles the problem from the left or right.
Labour threatening to alienate 1.63 million private landlords, curb agents fees and build vast numbers of homes for owner-occupation or public sector rental, instead, might be vote-winning electoral rhetoric but can you see it happening, over five years?
Conservative plans to release land and pump billions into stimulating the private homebuilding sector might shift the rental/ownership balance by a few points, over a period of years, but don’t hold your breath.
What seems more likely is that market forces will continue to be the most influential factor and whoever is in power will be forced to accept them.
With more people moving home, to seek available work, and more families in work, with money in their pockets, finding better places to live will be among their first priorities. Supplying it will produce a return for investors.
