GENERAL ELECTION RESULTS: Boris Johnson’s "get Brexit done" message has resounded with Britons, who have voted him in as the new prime minister of the UK. So, what does this mean for housing and the property market?
Former Prime Minister Tony Blair recently released a report, ‘UK General Election 2019: Housing – Steps in the right direction’, which looks at potential outcomes for the housing market post-election. Let’s take a closer look at the report, along with our Portico property expert’s forecasts.
What will the election mean for house prices?
Blair’s housing report laid out an interesting forecast for how the winning government could shape house prices, using estimates from the Ministry of Housing, Communities and Local Government price and supply data, and household income growth assumptions from the Office for Budget Responsibility.
Interestingly, the report suggests that house prices will rise over the next ten years regardless of the election outcome, and “in the absence of changes to interest rates or the appetite of foreign investors for UK property.” However, the largest house price growth would come under a Conservative government.
The report states that house prices could rise by 26% by 2030 if the Conservatives were to carry out their manifesto proposals to build ‘at least’ 200,000 houses per year in England over the parliament.
On the other hand, under a Labour government, the report estimated that, though the party’s plans are less clear, property prices could increase by 19% by 2030. This was on the caveat that Labour meets its target of 150,000 social houses by 2024, and that for every two such houses one private sector house does not get built.
Taking the average London house price* as an example, this would mean prices would effectively jump from £618,829 in 2019 to £779,724 in 2030.
This will come as welcome news to current landlords and investors who can potentially look forward to healthy capital growth. For hopeful first-time buyers, the report indicates that we will not see property prices crash post Brexit as many media headlines have suggested, so there may be negative consequences to sitting on cash and waiting out the market.
Help for first-time buyers
That being said, the Conservatives had pledged a number of proposals to help hopeful first-time buyers get a foot on the property ladder, from a First Home scheme, where first-time buyers will be offered a 30% discount on new homes in their local area, to “lifetime” fixed-rate mortgages:
“Lifetime” fixed-rate mortgages. These mortgages will require 5% deposits to help renters “realise their dream of owning a home.” Currently, fixed-rate mortgage deals can last for as little as one year before homeowners are moved on to the higher variable rate, so this would be a radical reform. The party says they would enlist funding from institutional investors like pension funds
We will report further on the ‘First Home’ scheme when more details are released.
Related: A Guide For First-time Buyers Purchasing Property In The Capital
Will we see a rise in interest rates?
Though Blair’s report suggests we will see house prices rise, it also states that there will not be an increase in interest rates in the foreseeable future - no matter who won the election. The Bank of England’s base rate is currently standing at 0.75% - a historically low figure.
So, what does this mean for hopeful homeowners, those with a mortgage, and landlords?
Paul Tait, Head of Portico Finance, says: “Now is a great time to buy or sell; mortgage rates are still at historic lows and even though base rate is predicted to remain low for some time, mortgage rates are ultimately set by the banks directly so taking advantage of this low interest rate environment could be a good idea as rates could rise in the future.”
With large increases in property prices in London over the last five years, we do advise landlords and homeowners to get their property revalued. This will make your lender recalculate your LTV, and a lower LTV means a better interest rate and a larger choice of lenders.
Improving the rental market
The private rented sector has grown rapidly in the last decade, growing by 63% between 2007 and 2017 according to a recent Guardian article. Johnson and the Conservatives have pledged to fix this, with proposals to increase the number of newly-built homes across the country, at a rate of 300,000 per year by the mid-2020s, and introduce new rental reforms such as scrapping Section 21:
The Conservative manifesto read: "We will end no fault evictions, so that landlords can't remove tenants without good reason, and introduce Lifetime Rental Deposits so renters don't have to save up for a new deposit while their money is tied up in an old one."
Blair’s report seems to agree that abolishing Section 21 “no fault evictions” is a step towards this, along with tackling rising rents.
Robert Nichols, CEO of Portico, reassures good landlords that this reform will not have a hugely negative impact: “To end an assured tenancy, landlords will have to use section 8, meaning that they will have to provide a sound reason for the eviction. This could be rent arrears, destruction of the property, selling the property, or wanting to move back into the property.
Should any of these issues arise, the government plans to expedite Court processes, meaning that landlords are able to regain the use of their property quickly. At the moment, it takes over five months for a private landlord to regain their property should the tenant choose to fight the decision in court.”
Recap on other Conservative proposals
Further Conservative pledges on housing include:
A commitment to introduce Lifetime Rental Deposits to help renters reduce the costs when moving
Introduce a Stamp Duty surcharge on non-UK resident buyers
Maintaining Right to Buy for all council tenants and the voluntary Right to Buy scheme agreed with housing associations
Extending the Help to Buy scheme from 2021 to 2023 and reviewing new home ownership initiatives upon its completion
Renewing the Affordable Homes Programme in order to support the delivery of hundreds of thousands of affordable homes
“Ending the blight of rough sleeping” by the end of the next Parliament by expanding on programmes like the Rough Sleeping Initiative and Housing First. The party stated that they will help pay for this by “Bringing in a stamp duty surcharge on non-UK resident buyers”
Read our complete Conservative manifesto summary.
Get a post-election sales or rental valuation
Try our free instant valuation tool and get an estimated price of your property in a few simple clicks. Our calculator takes into account the property’s postcode, the size of the property, the number of bedrooms and the condition of the property before making a very good instant estimate. Or, give us a call on 0207 099 4000 if you are thinking of renting, buying or selling. !!!