Coalition Government: Property Industry has its say

publication date: May 12, 2010
author/source: Kate Faulkner, Property Expert and Author of Which? Property Books

Coalition Government: Property Industry has its say

David Cameron, the man hoping to become the next Prime Minister, is calling on the Liberal Democrats to make a final decision over which party they will back to govern this country.

Yesterday, the Liberal Democrats opened formal talks with Labour, after Gordon Brown announced that he would resign as leader.

However, the Tories remain confident of gaining Liberal Democrat support to form a government, after they won the most seats at last week's general election but were short of an overall majority.

What House? spoke to various members of the property industry in order to gain their reaction to the potential impact that a deal between Cameron and Clegg could have on the UK housing market.

Ed Mead, Director of London estate agent Douglas & Gordon, says: "Uncertainty is a property owner's worst enemy. Many people will hesitate to sell or buy during this period, and the pound will stay weak meaning not much will change for property. Cash rich foreign buyers will continue to support a very thin market, especially in London where they are pumping up prices, and everyone else will continue to sit on their hands until a more certain future is determined."

Nigel Steele, a Partner at Jackson-Stops & Staff estate agent in Norwich, comments: "While there are differences in the policies of both parties there are common aims as well. Both parties want to stimulate the house building programme to keep supply of new houses on the increase. However, the Conservatives want to do this through the private sector and the Lib Dems through the public sector.

"The main thrust of both parties is to deal with the economy and this will in turn lead to confidence returning to the housing market as long as inflation does not kick in.

"With the Lib Dems as a partner there is likely to be encouragement for more housing but it is highly unlikely that housing will become more affordable until the economy recovers and we see the debt mountain decrease. There will however be more pressure to get lending on the move again but this will be a slow process."

Peter Mackie, Managing Director of buying agent and subsidiary of HSBC Private Bank, Property Vision, says: "We are already preparing ourselves for an increase in stamp duty to 5% on houses over £1m from next April, and with the Lib Dem's now in the mix, a 1% Mansion Tax on all houses valued over £2m could also become a reality."

"The majority of people who own a property over £2m have worked hard all their lives to get to that position. Why should they be penalized by having to pay Mansion Tax on income that has already been taxed?"

"For someone who is asset rich and cash poor, an additional £20,000 tax on a property could mean the difference between them moving or staying where they are. This could also lead to a sudden increase in the supply of property over £2m as people try to capitalise on the market, or get out before the tax is introduced. The imbalance will then change from a seller's to a buyer's market which could trigger a fall in prices."

Natalia Gameson, freelance property journalist and editor of Energyrethinking, comments: "A Tory-Lib Dem coalition deal could make small fairy steps towards easing our housing crisis, with the Liberal Democrats offering to boost the numbers of low-cost homes. Most importantly, this includes introducing a repair and renewal loan scheme for people who own empty properties which they could lease to housing associations. As the conservative policy is just to increase housebuilding without tackling the huge number of empty homes in Britain - currently well in excess of a million - a blend of both would be a start, at least."

Kate Faulkner, Managing Director of Designs on Property says: "I think it'll [a coalition] guarantee we have less homes in the future. The Lib Dem idea of solving the housing crisis via empty homes won't work - it's a long old process. Both Libs and Conservatives are likely to cut public spending big time and property will get hit. I'm not sure that they feel the need to supply property to people that can't afford to buy. Their view will probably go towards institutional investment to solve housing problems.

"The Tories want to introduce 'local planning' approval, initially this will stop developers in their tracks, until developers learn that they can't just put in an application to build and get it accepted. Short term this will be a problem, long term perhaps it will ensure developers will actually work a lot closer with communities before planning applications are approved. But this could take years.

"Property prices will eventually rise sharply again due to the lack of supply."

Peter Wetherell, Managing Director of Wetherell in Mayfair, says: "The politicians will have to start working together very quickly towards deficit reductions if we are to avoid a Greek tragedy."

"A hung parliament will cause a loss in confidence in sterling that paradoxically will benefit the prime central London market as overseas investors will take advantage of a weaker pound. For vendors it will create a further window of opportunity to sell at a good price as supply will remain low and demand from cash rich foreign buyers high."

"Over 80% of Mayfair property sales in 2009 were over £1m which means buyers are already counting the increased cost of moving at the higher stamp duty of 5% in April next year.

"It remains to be seen if the coalition government will proceed with the proposed Lib Dem Mansion Tax of 1% on properties over £2million. If they do there could be one of two outcomes, both of which will cause instability at the top end: Vendors who have been waiting to see what happens will either sell fast, or not sell at all."

Adam Feather, Managing Director of Robert Anthony estate agents in North West London, comments: "The greatest concern is that the differing views of the two parties will restrict the supply of much needed new homes in this country, as they have different views on planning regulations. However, the coalition should maintain the new stamp threshold of £250,000 for first-time buyers and abolish Home Information Packs, which would be great news."

Janet Burnell, Sales & Marketing Director at Pentland Homes, says: "We don't believe a Conservative-Lib Dem coalition government is good news for the new homes industry. The Conservatives want to give Local Authorities more control over planning decisions, a policy which we think would decrease the supply of new homes due to NIMBY-ism and could also affect the number of affordable homes being built, although, the Conservatives have said that they would reward councils for building more homes and promoting local economic growth. Meanwhile, The Lib Dems' proposal to put VAT on new homes would result in higher house prices, which seems ironic considering that all parties agree that we need to build more houses.

"We believe that the housing industry would be better with a Labour-Lib Dem coalition as Labour's policies have given clarity to the housing supply (the amount of homes to be built during the next 15 years through regional bodies). In addition, over the last few years, many first time buyers have got a foot on the ladder with shared equity, a scheme that was promoted by the Labour Party."

Simon Gammon, Head of Knight Frank Finance, says: "Not only do the markets have the uncertainty of the first hung parliament since 1974 to contend with, but it is still not clear whether one party will end up with a strong enough mandate to govern effectively - another quick election is not out of the question."

James Thomas, Head of Residential Investment and Development at Jones Lang LaSalle, says: "The spring market is traditionally a time when volumes in the property market bounce and activity levels peak, however the result of yesterday's general election will squeeze transaction volumes. Some sellers might choose to await clarity on the necessity of HIPS prior to marketing a property while some buyers will await a further possible stamp duty review. For developers, the ability to expediently process planning applications will be inhibited further as the power of centralised planners versus local councils now hangs in the balance. For many employees in the public sector, the imminent spending cuts pose a significant threat to their remuneration and job security.

"There will be a long list of repercussions after today's result, and transparency and detail on housing policy is crucial: the sooner this can be provided the better."

Jeremy Leaf, RICS spokesperson, comments: "For much of 2010, the housing market has been under the shadow of the general election with the gap between supply and demand growing wider as potential house buyers opted to stand on the sidelines awaiting the outcome of the poll. However, the start of spring has seen renewed optimism with the good weather improving sentiment and surveyors expecting an increase in both sales and house prices. The housing market often sees an increase in new instructions in the early part of the year with sales boosted in the spring and this year has been no exception."

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