13 Dec 2019
Ion Fletcher, Director of Policy, BPF
The people have spoken and yesterday’s election returned the largest Conservative majority for 30 years. The whys and wherefores will be debated over the weekend but the question we are asking ourselves right now is what does this mean for the property industry?
In some ways, not that much. When we analysed commitments made by the main parties in the run-up to the election, those in the blue column were considerably closer to the status quo than those in the red, yellow and green ones (Conservative Party; I guess there’s a clue in the name). So, instead of a new land value tax we’re likely to get a review of business rates. Instead of residential rent controls we’ll get a “lifetime deposit” that moves with tenants. And instead of a “use it or lose it” approach to planning consents we’ll get simplifying the planning system for households and small builders.
But there was one big area where the Conservatives advocated a radical departure from current arrangements: Brexit. Indeed, some will say that this is what won them the election. The size of the Conservative majority makes it very likely that we’ll be leaving the EU by 31 January, probably with a revised withdrawal agreement and a transition period going no further than December 2020.
This increased certainty regarding Brexit is important for a couple of reasons:
First, so many investors held back from buying UK real estate in 2019 that investment volumes are likely to be around 30% lower than they were in 2018. We may well see a “Brexit bounce” for UK property deals next year as the Brexit risk becomes easier to price in.
And second, the Government’s agenda has, for the last three years, been dominated by Brexit to the seeming exclusion of almost everything else. Important domestic policy issues have been parked as huge amounts of civil service resource and ministerial time have been diverted to preparing for departure and responding to parliamentary challenges. With Brexit seemingly “done” (at least politically), issues such as regional growth, the future of our towns and meeting our housing challenge can finally re-take centre stage.
So, what property-related announcements might we expect in next week’s Queen’s Speech and in the days that follow, which will doubtless also include a new Budget?
Expect to hear lots about big capital investment. This is a point that both the PM and the Chancellor have been making since their respective campaigns for leadership of the Conservative Party. On the face of it, this is good news for the industry as upgraded physical and digital infrastructure should unlock new development opportunities around the country. Increased productivity arising from being better connected could also have a beneficial impact on rents over the longer term. However, as always the devil will be in the detail and even the best of projects may stumble once they hit our chronically stretched planning system.
I’d also expect a renewed focus on home-ownership as the preferred housing tenure, with an extension to help-to-buy, despite the heavy criticism the scheme has faced from some quarters over the years. Local authorities may in future be required to use developer contributions to discount homes for local people and key workers, a potentially significant change from how affordable housing contributions are currently used. On a related note, expect changes to Stamp Duty Land Tax (SDLT), with an increase in the longstanding minimum threshold of £125,000 and a potential reduction in the very highest rate of 12%. However, this will have to be paid for somehow and I wouldn’t be surprised if the government introduced a new SDLT surcharge on foreign owners of residential property.
Finally, expect a continued heavy (though perhaps not as heavy as if another party had won) focus on sustainability and the environment. The government will most likely be moving forward with current proposals for biodiversity net gain and higher energy efficiency standards for buildings and commit to phasing out diesel and petrol car sales by 2040, requiring electric vehicle car charging points to become more widely available.
As the elation of electoral victory settles down and the new government gets to work, we at the BPF will be working hard to build a meaningful partnership with the new government, to make sure it understands the positive social and economic impact our industry can have. The UK faces huge challenges that we are uniquely placed to help tackle, be it delivering more homes and better places, supporting our town centres, spreading prosperity through our regions or creating a clear roadmap to creating a net-zero built environment.
P.S. in case you had forgotten, we have six mayoral elections to look forward to next year! And so the electoral machine rolls on…