The Politics of Property in London
There’s only 3 weeks to go until the general election. While the political scene is uncertain with results difficult to predict, the election itself is having a significant impact on the property market. Primelocation says that from 60,859 homes on sale in the capital this week, no fewer than 17,101 have slashed their asking prices. In fact, property prices continued on their six-month decline with stock levels at their lowest since February 2014. “Agents are reporting a continued slowdown in some areas as buyers and sellers nervously await the election,’ says Stephanie McMahon, of Strutt & Parker.
Foxtons have blamed much of the market slowdown on this supposed wariness among buyers and sellers. Chief executive, Nic Budden said “we see the sales market remaining somewhat constrained until at least after the general election and even then we will need some certainty and clarity in the market before we can predict with any level of certainty where volumes are likely to move in the market.”
The outcome of the election could have a considerable impact on the Central London residential market, but does anyone really know if the election would affect the values of properties? When the result of the election is uncertain, the luxury residential property sector in particular can go into a period where both buyers and sellers alike are unsure of what to expect, and this might cause changes to how it behaves. "In the market we can already see sellers trimming their expectations having tried last year’s prices. Those who still quote 2014 prices will find few feet through the door," said Henry Pryor, a buying agent and market commentator.
All parties are in agreement that we need more homes. Labour has repeated its promise to boost house building rates to 200,000 a year by 2020 and have proposed a mansion tax which has meant there is general pressure to find new ways to tax property because rich people cannot move their houses to avoid the taxman. They are already under pressure to extend its election promise to give councils power to ban people from buying new homes to let out.
The Liberal Democrats have announced it would build more social housing and 5 new garden cities. However, even properties benefitting from interior design london, prices are tumbling as a result of the Labour and Liberal Democrat mansion tax threat. “If the threshold of £2million is the starting point it could create a collapse in prices between £2million and £3million,’ says Howard Elston of Aylesford International agency.
The Conservatives pledging to build 100,000 new starter homes all offered at a 20% discount to first-time buyers under the age of 40. In a bid to target this large age group who are priced out of the housing market at the moment, David Cameron will effectively look to double the number of cheap new houses. His thinking is to allow property developers London to build on brownfield commercial land and waive their prospective taxes in return for a significant discount on sales.
However, Labour wants to levy a tax on all properties that cost more than £2million. With the number of these properties growing substantially in recent times, it will be the case that more homeowners that expected are subject to this charge. Consequently, this could lead to a reality in which homes that should be priced more than £2 million will actually be sold for slightly below the threshold in order to avoid the tax. "2 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.
Grainne Gilmore, Head of Residential Research at Knight Frank has suggested "at the top end of the market, the outcome of the election and mooted mansion tax uncertainty has started to weigh on activity.” “While buying intentions are still relatively high, there is less conviction that prices will rise strongly this year,” said Grainne. Marsh & Parsons’ Chief Executive Peter Rollings reiterates that once political doubt is over, "activity volumes will be turned up”.Mark Hayward, Managing Director of the National Association of Estate Agents: “whichever party is likely to come in to power and with the housing market being based solely on sentiment, any uncertainty may result in a temporary lull.”
The Chancellor's reforms to stamp duty in December 2014 ended the large leaps in taxes paid when a property's price passed certain thresholds. In the budget set to be released this week, there could be a rise in the basic tax threshold or possibly a reduction in national insurance both of which would benefit the vast majority of us.
Rightmove believes prices can stay consistent throughout this uncertain time, stating “election jitters could lower the number of London property transactions rather than lower prices, resulting in a moderate reduction from the high volumes seen in 2014, but with average prices driven up by the more resilient activity in popular locations.”
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