As the UK begins preparing for the upcoming general election, parties are beginning to piece together their manifestos, with all of them hoping to sway voters, one of the most important demographics is likely to be the private landlord.
With an increasing number of people renting, landlords will have a keen eye on individual party promises to find which campaign pledges are most likely to affect the buy to let market.
This is the first time since 1974 that we’ve gone to the polls under a coalition government,and policies relating to the property market will figure significantly in each party’s election manifesto; a by-product of this is uncertainty for those looking to buy, sell or invest in property.
However, it’s important to remember that any hiatus in the property market that may occur is likely to be temporary, no matter which party wins come May 7th.
Post-election, we anticipate the property market will pick up quickly, although how quickly depends largely on who is elected. If Labour come to power, then this may cause a temporary interruption and a delay in a return to confidence, but this is expected to only be short term.
If there is a Conservative majority or a Tory/Lib Dem coalition, it will be very much a case of ‘as you were’, so expect confidence to resume very quickly, with price rises of 2-3%.
In previous years, when a May election has been held (1997, 2005 and 2007) the number of sales in the three months post-election increased by between 20.0% and 24.8% compared with the previous three months.
Whilst these months are consistently popular months for moving house, all these figures exceed the usual increase of 15.9% experienced over the same period in non-election years.
Right to buy
Schemes such as ‘the right to buy’ being trialled in Kensington and Chelsea could be a game changer for landlords if introduced nationwide. In terms of negative impact, these policies could affect the amount of people looking to rent properties and lower demand for landlords. However, more positively, those looking to expand their portfolio of properties might discover a larger number of affordable houses on the market to choose from.
The Labour party has announced plans to introduce longer tenancies as standard in private rented sector if it comes to power. This would help to give tenants greater stability and to stop landlords terminating tenancies ‘simply to put the rent up’.
But how would these longer-term tenancies work?
The three-year agreements would start with a six-month probationary period, at the end of which the landlord would be able to terminate the tenancy agreement should the tenant have fallen into arrears or displayed anti-social behaviour, for example.
This would then be followed by a two-and-a-half-year term during which tenants would be able, to terminate the contract with one month’s notice, as is the current state of play.
Landlords however would be required to give two months’ notice and only be able to terminate contracts if:
• The tenant was behind with their rent, was guilty of anti-social behaviour or breached their tenancy agreement
• The landlord wanted to sell the property, needed it for their own use, or required it for their family
• The landlord planned to refurbish or change the use of the property
Labour also plans to introduce ‘rent controls’ should it come to power. This is effectively a ceiling of which rents in the PRS cannot exceed, with Labour saying that it is currently working with the Royal Institute of Chartered Surveyors (RICS) to establish what the “appropriate benchmark might be.”
This idea has not been without its critics however. According to the RLA, three out of five landlords would leave, or consider leaving, the private rented market if rent controls were introduced.
Labour also wants to levy a tax on all properties that cost more than £2 million. However, the number of properties in this price bracket has grown significantly in recent years, especially in the capital, so this tax will affect an increasing number of people and could lead to a situation in which homes which would normally go for a price of more than £2 million will now be sold for slightly below the threshold in order to avoid the tax.
“Two out of the main political parties still favour some form of mansion tax so owners and buyers will be rightly factoring it into their decisions as the election approaches,” said Sophie Chick, senior research analyst at Savills.
David Cameron has promised to make roughly 200,000 homes available to first-time buyers in England by 2020 if the Tories win the election.
This is further to the coalition government’s plans for 100,000 cut-price homes for people aged under 40.
While this is good news for those looking to get on the property ladder, it could be bad news for landlords, as it may have a negative impact on rental demand.
Foreign investors could be hit badly by post-election changes, with plans already a foot to bring Capital Gains Tax (CGT) duties for overseas owners in line with those for UK nationals.
Currently only UK residents are subject to CGT on gains made on residential properties. If new plans (currently under consultation) are introduced in their current form, overseas owners of UK property would become liable for CGT from April 2015.
However, so far there has been little evidence that overseas owners are looking to sell up.
Whatever the election hold in store, make sure you protect your investment with great value landlord insurance from Discount Landlord.