Potential repercussions of a Labour victory on the real estate sector in upcoming elections
Subtitle: As Sir Keir Starmer steps into Downing Street, his government sets out ambitious housing policies aimed at boosting supply, reducing costs, and protecting renters.
In a significant shift for the housing market, the new Labour government, following a landslide victory in the general election, has unveiled a series of ambitious plans aimed at addressing the UK's housing crisis.
Sir Keir Starmer, the new Prime Minister, has emphasised the need for more affordable homes, a sentiment he expressed in his first speech outside Number 10. One of Labour's flagship housing policies is the Freedom to Buy scheme, which aims to help 80,000 young people onto the housing ladder over the next five years.
However, the road ahead is not without challenges. Slowing rental growth has led many landlords to question the viability of buy-to-let, while high interest rates continue to stifle house price growth and property sales. Landlords have already been hit by restrictions on mortgage interest relief and extra stamp duty charges on additional property purchases.
To alleviate these concerns, Labour plans to make the current mortgage guarantee scheme permanent, although the exact timing for this extension remains undisclosed. Additionally, the government intends to reduce the first-time buyer stamp duty threshold from £425,000 to £300,000, which could boost supply and bring prices down.
Labour's housing policies also focus on protecting renters. The Renters Reform Bill, currently going through parliament, aims to scrap section 21 notices, known as 'no-fault' evictions. Labour has also pledged to immediately abolish these notices and prevent private renters from being exploited and discriminated against.
Moreover, Labour plans to increase the stamp duty rate on purchases of residential property by non-UK residents by 1%. This move is intended to discourage foreign investment in the UK property market and free up more homes for domestic buyers.
The success of Labour's housing targets depends on the engagement and cooperation of local authorities, developers, and communities. Building 1.5 million homes within five years is considered an extremely tall order, requiring significant resources, substantial investment, and careful planning.
There are also concerns that Labour could target capital gains tax (CGT) as a means of raising revenue, which could bring another threat to landlord profits when exiting a buy-to-let portfolio. A quarter of those who own more than one property and own them all outright are interested in a two-year temporary capital gains tax relief for landlords who sell to their existing tenants.
As the new government embarks on this ambitious housing agenda, there is hope that slowing inflation will encourage the Bank of England to reduce interest rates, further stimulating the housing market. The future of the UK's housing landscape is uncertain, but one thing is clear: significant changes are on the horizon.
