At A Glance: What Conservative Policy Promises Mean For Property
The Conservative party won a comfortable majority in Thursday’s general election, giving the party and the prime minister, Boris Johnson, a mandate to push through the policies it outlined in its pre-election manifesto.
Here are the key policies that will impact the real estate sector.
The biggie. The Tory mantra during the election campaign was “get Brexit done.” Barring divine intervention it now seems certain that the UK will leave the EU on 31 January under the terms set out in the withdrawal agreement negotiated by Johnson earlier this year.
An end to the uncertainty around Brexit is expected to unleash a large amount of pent-up demand for UK real estate investment after a moribund 2019. But the negations on the new trade agreement with the EU that will happen next year will not be simple, and Johnson’s promise not to extend the negotiating period beyond 2020 could create another “no-deal” cliff edge as next year draws to a close, reigniting the uncertainty that defined 2019.
The Conservative manifesto policy on housing favours home ownership over renting. The party has promised to facilitate the building of 300,000 new homes a year in the UK. Last year 241,000 new homes were built, a 30-year high. It pledged to introduce long-term fixed-rate mortgages for house buyers — to minimise the amount of deposits needed to buy a new home — extend the right of council tenants to buy their homes, extend the Help to Buy scheme where the government guarantees loans for first time buyers, and simplify the rules around shared ownership.
There will be a further 3% increase in stamp duty for non-UK residents buying property here, which will not please the London residential development market, where in 2016 13% of buyers were from overseas. The new surcharge means that for an overseas investor buying a property worth more than £1.5M, stamp duty would be 18%.
In the rental sector, The Conservatives have pledged to introduce lifetime deposits, so renters only need to put up a deposit once, rather than every time they rent a new property. And it has pledged to end “no-fault evictions” where landlords can get rid of tenants for no reason. The British Property Federation has said this policy needs to be carefully implemented, as it may hinder investment in the build-to-rent sector if owners fear that tenants would have indefinite tenure.
Mindful of the struggles of the high street, the Conservatives have pledged to reduce business rates for small retailers, pubs, music venues and cinemas. While that is good news for independent businesses, ratings experts at Colliers said it somewhat misses the point — big chains are feeling most of the pain and closing vast swathes of shops. The changes will do nothing to help these operators, and the brokerage argued the tax should be reduced to help slow the bleeding.
Another policy that will have an impact on the retail and leisure sector is the £3.6B Towns Fund the Conservatives pledged to set up. One hundred towns across the UK will be able to bid for up to £25M each to help with regeneration, with a focus on transportation, digital connectivity, skills and culture.
Critics of the policy have pointed to an analysis in the Times which showed that of the first 100 towns named as eligible to bid for the funding, there was a disproportionate amount that were in Tory constituencies, even though they were not among the most deprived towns in the UK.
One slightly left field but intriguing policy that would impact the real estate sector is the promise to create up to 10 freeports around the UK. Freeports are areas where the companies that operate there pay little or no tax, and there is no tariff on goods or money coming in to them. Tax would have to be paid when goods or money were moved out of the freeport and into the UK proper. In places like Luxembourg and Switzerland, freeports have seen huge warehouses spring up which the wealthy use to store goods like art, so they don’t have to pay tax on them. They have also been sites of office development. Freeports could be used to stimulate development around the UK, and Property Week reported earlier this year that the owner of the Royal Albert Docks office development in east London was considering applying for freeport status if the policy was pushed forward.
The Conservative party promised an initial £20B of extra spending on UK infrastructure, and one pledge in particular will be of great interest to the property sectors in the North and Midlands. While the manifesto was decidedly cool on whether to press ahead with the HS2 rail line amidst rising cost estimates, it promised to invest in new rail lines connecting towns in the North like Leeds and Manchester, and create a new Midlands rail hub improving connectivity between Midlands cities. These transport improvements are seen by property professionals in these areas as hugely beneficial for local economies, and thus the property sector.
The Conservative manifesto promised to make the UK net carbon neutral by 2050, and although it did not go deeply into specifics about how it wants to get there, the built environment, accounting for 36% of carbon emissions, will have to play its part in meeting that target.
Staying at 19%, nothing to see here.