UK property: what's in store?
Today the United Kingdom's political position is an unusual one – negotiations and bartering between parties are shaping the country's new government, despite a political system that normally favours a winner-takes-all strong administration.
The next few days and weeks will be a fine time for foreign buyers to take advantage as uncertainties about policy formulation would keep sterling bearish.
Closing the UK's budget deficit is the key objective for all parties but the Conservatives and Liberal Democrats are also very close to each other on property issues.
- They both want an end to the old Labour government's desire to have national target figures for new house-building. Instead, they favour locally-determined planning processes with financial incentives for local government to agree to have more homes in their areas;
- They both want an end to Quangos, unelected regeneration bodies (supposed to encourage private investment in commercial and residential property) which are funded by taxpayers and have enjoyed a very mixed record of success. The old government didn't even know how many quangos existed – official figures said something between 790 and 1,100 although some estimates put the total as high as 5,000. Billions of pounds of public money will be saved;
- Both parties want a reform of the controversial UK Home Information Pack system of preparing paperwork about homes on sale;
- Both parties want residential developers to have a greater level of environmental friendliness in their new homes, although both oppose the old government's eco-town system of building brand new settlements, often in the countryside, loaded with green features;
- Both parties wants more emphasis on bringing empty old homes (there are about 750,000 of them in the UK) into use as a way of limiting the number of new homes required to house a growing population.
Are there disagreements on property issues between these two parties? Of course.
The Liberal Democrats want a 'mansion tax' of extra stamp duty on homes that sell for more than £2 million (Dh10.96m) – the Conservatives oppose this, but the number of properties this applies to is so small that no one is ruling out a compromise. The Liberal Democrats also favour value added tax being applied to new homes (currently they are exempt – a historical oversight, the Lib-Dems say) – who knows if the Conservatives would agree?
There is also concern among Conservatives about a Lib Dem pledge to reduce (or at least prevent further growth in) the number of holiday homes in areas of the UK where their predominance leads to a shortage of homes for local populations. Again this is not seen as a deal-breaker between the two parties. So if housing is anything to go by, a Conservative-led government may well secure broad Liberal Democrat support.
But then what happens? Historically, British property markets bounce after an election period of uncertainty. The commercial sector (already a little better than its recent lows) usually rises slightly; the residential sector (doing relatively well until recently) normally bounces rather higher.
But this time, the new government's first task is to announce swingeing public sector spending cuts and, within a few weeks, tax rises too in an attempt to tackle a budget deficit that dwarfs even that of Greece.
UK experts are surprisingly muted. "Conservatives mean good news for business and less tax, so would get people moving short term but would cause a fall in values over the next six months as supply increases and demand doesn't quite accelerate to keep pace" says Ed Mead of London estate agency, Douglas & Gordon, a favourite purchasing partner for Middle East buyers looking at the UK.
The next six months will prove whether the property industry benefits from the fiscal measures, or suffers as much as individual Britons may have to. In the meantime, with the exchange rate in disarray, it's the overseas buyers and investors who may have most to gain…
- The author is a property correspondent for The Observer. The views expressed are his own
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