In 2017, then Prime Minister Theresa May took a gamble by calling for a snap General Election. She did so with a view to extending the Conservative Party’s majority in the House of Commons, thereby making it easier for her to pass her Brexit deal.
The decision backfired quite horribly – from May’s perspective at least – as the Tories were left with fewer seats than before. A Brexit deadlock ensued, eventually costing May her position.
In late October 2019, her successor Boris Johnson made the same call, but with a markedly different result. The Conservatives successfully secured an overwhelming majority, winning 365 seats – 48 more than two years previously.
It means that as we head into 2020, there is a clear sense of a new beginning. Most notably, it seems that Johnson will deliver on his election promise to get Brexit done; this is already becoming evident, with MPs voting 330 to 231 in favour of his Withdrawal Agreement Bill on 9th January.
For the property market, though, should the recent election result be a cause for celebration or trepidation? I’ve examined the Tory Party’s election promises to see what potential changes are on the horizon for the real estate sector.
More new-builds promised
In my living memory, there has not been an election campaign that has not featured party promises regarding the housing crisis. Quite simply, the UK requires more homes; millions of them. And as a result, government after government has made promises about how it will fund developments, incentivise housebuilding and ensure more affordable homes are erected.
The new Conservative majority Government has done just that. It says it is committed to building 300,000 new homes every year by the mid-2020s. Moreover, it has set a target of adding one million new-builds to the country’s housing stock by the end of the current parliament (2025).
Onlookers will take such promises with a rather hefty pinch of salt. As mentioned above, we have seen targets like these set and missed with unerring regularity.
Let’s take a look at some recent statistics: according to the Ministry of Housing, Communities and Local Government (MHCLG), annual new-build dwelling starts in the first six months of 2019 totalled 160,640, a 1% decrease compared with 2018 and well short of the amount required.
Furthermore, successive Conservative governments have failed to deliver a single new “starter home”, despite promising to build 200,000 by 2020, the National Audit Office revealed at the end of last year. The 2015 spending review has set aside £2.3 billion to support the delivery of the first 60,000 properties under the scheme, which failed to ever get off the ground.
It is unsurprising, therefore, that when FJP Investment commissioned a survey of more than 750 UK investors after the election result, the majority (61%) said they believe the government will fail to reach its target of a million more new-builds by 2025.
Clearly, the new Government will have to take decisive action in the coming months – and particularly in the Spring Budget in mid-March – to prove to people that it will come good on its new-build promises.
Stamp duty reforms
Elsewhere, another of the Conservative Party’s election promises was to review stamp duty. For one, it is proposing a stamp duty surcharge of 3% for non-UK residents who are buying a UK property.
This is a reform that has overwhelming support among UK investors. The same FJP Investment research mentioned earlier revealed that 70% of private investors are in favour of a stamp duty surcharge for overseas buyers.
But could further stamp duty reforms be afoot? It would seem so.
On the one hand, it has been suggested that the threshold at which no stamp duty will be paid could rise to as much as £500,000. It might be completely scrapped for first-time buyers all together.
More radically, Johnson has even hinted previously that the tax could be set for a major overhaul – it could be paid for by the seller, not the buyer.
Such a drastic change appears unlikely, but the Government will be keen to review how it can reform the tax to simultaneously fuel greater activity in the property market while also improving the public coffers. Indeed, figures released in October 2019 by HRMC showed that stamp duty dropped year-on-year by 7% to £11.9 billion in the 2018-19 financial year.
All eyes on Spring Budget
I have mentioned it above, but the upcoming Spring Budget will be of great significance to property buyers, sellers, renters, investors and developers alike.
The annual fiscal announcement was recently moved to the autumn, but it is taking place in spring once again having been cancelled last November due to the calling of the general election. It is always a noteworthy event – a chance for the Government to not only report back on the performance of the UK economy but also put forward its plans for tax reforms, new legislation and spending commitments.
The 2020 Spring Budget is the first under Prime Minister Boris Johnson and Chancellor Sajid Javid. It is the first of a new parliament and it seems likely to be the first after the passing of the Brexit deadline. It stands to reason, therefore, that the Budget on 11th March will be one of paramount importance.
For all the policies outlined in its manifesto and the promises made while on the campaign trail, the Conservative Party will be judged on the actions it takes over the coming months. And if Johnson et al succeed in making progress with Brexit, the next step will be for them to lay out a clear and positive plan in the Spring Budget; one that all parts of the UK property market can get behind.