Boris Johnson has replaced Theresa May as Britain’s Prime Minister, with barely three months to go until Brexit. The appointed PM will have a huge impact on the outcome of Brexit, as well as the housing market, the fate of Britain’s landlords, and the PRS.
Though it’s essentially a game of wait and see, here's our forecast for how the new Boris Johnson's key policies and views could affect the property market.
(If you are keen to find out your pre-Brexit current property value, you can get an online valuation in just 60 seconds through clicking the link.)
1. Boris Johnson states he’s committed to building more affordable homes – and has hinted at the extension of Right To Buy
Housing Today noted that Johnson’s history as London mayor suggests that he likes to prioritise an increase in overall housing supply over provision of subsidised properties for low income earners.
In addition to this, Property Reporter, Graham Norwood, recently wrote a great article which reminded us of Johnsons’ Conservative conference fringe speech, where he expressed a strident commitment to private home ownership. In his speech, he related his first experience of seeing poor quality rental flats as a reporter on the Wolverhampton Express and Star, and he hinted at support for the continuation or even possible extension of Right To Buy.
2. Boris Johnson plans to reduce “absurdly high” stamp duty, which could help first-time buyers get on the ladder and invigorate the prime London market
Boris Johnson has made a bold promise to abandon all levies on properties valued at under £500,000. The hopeful PM also intends to lower the top rate of stamp duty tax on the most expensive properties (valued over £1.5m) from 12% to 7%.
So, what would Boris Johnson's stamp duty plans mean for you?
First time buyers and home movers purchasing property under £500,000
Currently, first-time buyers in England or Northern Ireland are only free of Stamp Duty tax on properties valued at £300,000 or less. For first-time purchases worth between £300,000 and £500,000, no stamp duty is paid on the first £300,000, meaning a reduced rate is paid.
For example, under the current rules, a first-time buyer purchasing a property in Highbury valued at £450,000 would be liable for £7,500 in stamp duty costs.
In this current example, Johnson’s change would mean the first-time payer is exempt from paying any stamp duty whatsoever. His reform would also affect first-time buyers buying homes worth over £500,000, who would also pay less tax.
Home movers planning on buying property under the half a million-pound mark would also benefit immensely from Boris’ stamp duty reforms. While George Osborne’s changes in 2014 lowered stamp duty for this group, this change would make them exempt from stamp duty altogether.
The top end of the property market could get a boost – and prime London property prices may increase
When George Osborne hiked up stamp duty for homes valued at £925,000 or more in 2014, the top end of the market (particularly prime central London) came to a standstill. We reported on this “standstill” back in 2016, stating that transaction volumes, or the number of homes being bought and sold in the capital, were “critically low”:
“Transaction volume levels … are down 60% in prime central London against last year. With price historically following volume decline, we have now seen the first monthly year on year price decrease of 1.1% in the City of Westminster (September 2015 to September 2016) since the 2008 recession.”
A large part of this drop was explained by a big bounce in sales in the run-up to April this year, when a change to property taxes introduced by ex-chancellor George Osborne came into effect.
We know that stamp duty hampers household mobility, so it’s likely that Boris’ plans to cut the top rate of stamp duty from 12% to 7% could invigorate the top end of the property market again.
New research from Vyomm reiterates this, stating that prime London property prices will also get a boost as a result of Boris’ plans to reverse stamp duty land tax (SDLT) at the top end of the market.
The firm has stated that this reform could boost home values by around £700,000, as well as spurring on demand from London homebuyers.
Vyomm’s data analysis highlights that in London, this stamp duty reversal could see a 3.41% or £102,911 increase on the current average house price of £3m. For those with property valued in the £10m plus bracket, the current average sold price of £16.8m could rise to £17.6m.
What about Landlords?
Boris Johnsons’ stamp duty reform could also include the 3% levy attached to the purchase of second properties, which could have a huge impact on the PRS - though this was not actually mentioned in the report.
However, if the ‘landlord second home tax’ was dropped, research suggests that just 10% of properties bought last year would have been liable for stamp duty – so the majority of landlords would be considerably better off.
3. Boris has doubts surrounding HS2’s future
Boris Johnson’s Uxbridge and South Ruislip constituency will be affected by HS2, so it’s no real surprise that the hopeful PM is not an advocate of the high-speed rail line.
Johnson stated that HS2, which will link London, the Midlands and the north of England, will cause “a great deal of difficulties” for the local people. He also spoke of his “anxieties” about the business case and he said he would have a review of the project if elected PM.
Many people are of a different view to Johnson, and believe that HS2 could be key to regional regeneration in the north and Midlands, and anticipation for the rail link is already increasing investment and property prices within the affected areas.
Therefore, there is a great opportunity here for landlords to pick up a good investment property; areas like Barbury will be in close connection with London, as well as near a number of popular prep schools that renters and homebuyers move into the area for.
At Portico we do sympathise with Johnson’s anxieties, as though it’s likely some areas along the route will see prices rise, many locals will have to face extreme noise pollution and general disruption.
4. Boris has “grave reservations” about Heathrow’s Expansion
Boris Johnson once vowed to lie down in front of bulldozers to stop Heathrow Airport’s expansion, and though not as passionate, his feelings towards the expansion remain grave. Johnson recently said he’d review the project if we were to be made prime minister.
The Independent recently reported that cancelling plans for a third runway at Heathrow airport could cost the UK economy more than 300,000 jobs, though on the other hand, expanding the Airport could also have a negative effect on local property prices.
In fact, since June last year when the proposed expansion was approved, local house prices in affected areas have fallen -2.6% on average.
Only time will tell…
Only time will tell what Johnson’s appointment really mean for the property market and for the PRS. What is certain however, is that he now faces the Brexit he championed, but most of the country is still guessing as to how things will unfold.
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