Now the election has happened, acres of print are being devoted to parsing the victor’s manifesto for clues as to what the future holds. Unfortunately the (successful) Labour strategy of saying almost nothing that might frighten the horses has not given the commentators much meat to work with, and the King’s Speech not much more. It being a Labour government, the rather obvious conclusion is that those with wealth of all sorts are going to be poorer; but that didn’t happen last time Labour swept to power, though in more benign economic circumstances. A more nuanced outlook is that the working wealthy may end up better off in five years' time whereas the outlook for the rentier class, living off savings, might not be so rosy.
The emphasis in every Labour utterance has been on growth, and the engine for that is a relaxation of planning controls - taking the power of veto away from local interests and allowing larger national interests to take priority. The Greenbelt has taken many of the headlines with the stated intention of allowing buildings on sites that are to all intents and purposes ‘brownfield’ but caught up in the catch-all of the Greenbelt. So far, so sensible, in that these sites are where people actively want to live, are currently eyesores and where, for the most part, the NIMBYs will be quiescent.
Where they won’t be is in the march of pylons and wind farms across the ‘green and pleasant land’ of the south of England which will be inevitable if there is going to be any reality in the aspiration for net zero by some time in the 2030s. The National Grid was constructed around huge coal-fired power stations - mainly around the coalfields of Nottinghamshire and Yorkshire - with pylons radiating out from there. The new energy sources are on the North Sea and the ‘front line’ as it comes ashore are the coasts of Essex, Suffolk, Norfolk, Lincolnshire and Yorkshire - but going out in a fan from there to the rest of the country over places that haven’t, yet, considered themselves threatened. Add to that onshore wind farms on top of many very visible hills in beautiful places - think the Cotswolds and the South Downs - and you will have many unhappy people; but with a huge Labour majority, they will have to suck it up.
What about tax and property? It’s certainly going to be bad for Non-Doms and payers of stamp duty - but the late Conservative government hadn’t exactly been good friends to either of these constituencies. On the Stamp Duty front the new chancellor has floated another hike in the Stamp Duty paid by overseas buyers and, rather more surprisingly, the nil-rate band for first time buyers is going back to £300,000 having been raised by the Conservatives to £450,000. Non-Doms are already feeling the heat and many that we know are now seriously considering their options. It is not the tax on their worldwide income that seems to be causing the most angst, but the potential Inheritance Tax net thrown over their offshore assets. Italy looks likely to be the main destiny for many of those for whom this is the final straw. It’s not just the money that will be attractive given our recent so-called summer.
Given the pro-growth ambitions of the new government, it’s surprising that they haven’t been more ambitious in the sphere of property taxes. It has been obvious for years that Stamp Duty is a tax on mobility and that the current council tax regime is both unfair and illogical; a semi in Barrow-in Furness pays nearly twice the council tax of a mansion in Belgravia. To load up the former and leave the latter unreformed seems an odd choice - conservative even - but it’s the easy option. A reform of Council Tax would imply a revaluation of every house in the country - which will take time. What will probably emerge as the new government beds in, is a comprehensive look at local taxes, hand-in-hand with a review of how local government functions. The current system of slowly bankrupting councils, starved of funds by central government with limited spending and taxing powers is simply not tenable.
What about the market now? The rich are still rich and for the best it’s still a seller’s market in London, the country and across the places in the world where the rich want to be. The problem in all these markets is supply; but then it always has been. What is not being commented on much, though we are seeing increasing evidence of it, is a recession among the middle classes that is affecting any business that depends on their prosperity. The cause? Principally the ending of fixed mortgage deals taken on at a time when interest rates were at historic lows. A trebling of monthly mortgage payments is blowing holes in middle-class budgets and when you add to that 20% more for school fees, the property markets where mortgages rule are feeling the chill. Mortgage rates may well come down, but very unlikely to the levels enjoyed only quite recently.
The buy-to-let market is now on the critical list. It was never a place where you got great income returns; 2.5% net in London would be good. But with interest rates at nearly double that and a battery of regulation and restrictions imposed by the last government, it is not surprising that private landlords are looking for an easier life and more money. The reality is that this was an attractive investment when the residential market was going up at 15-20% per annum, as it was in the noughties and early teens. The last ten years have been pretty well flat and without a decent yield it now has little appeal. If the late government’s aim was to kill off the private rented sector, they’ve done a good job. With sixteen housing ministers over fourteen years they probably didn’t notice.
Despite this, it’s important to bear in mind that only 22% of all properties in the UK have a mortgage and the cost-of-living crisis is now receding. Normally an election, with all the uncertainty that that brings, allows buyers and sellers to sit on their hands. This time the element of uncertainty wasn’t there and there was a widespread feeling that it couldn’t get much worse. Unless it does, the prospects for the next year are reasonably okay: competition for the good stuff, price sensitivity for the second line, where asking prices are often 20% adrift from reality, and a mainstream market where mortgage rates are going to grind things lower. In our market there are less buyers and less sellers but it’s functioning and active - much better, looking back on it, than the long aftermath of George Osborne’s Stamp Duty axe ten years ago.
