The aftermath of the 2015 General Election

The month of May was a tremulous and uncertain time for the UK housing market, as the entire country waited with baited breath for the results of this year’s General Election, and how it would affect a number of factors that govern the sector.

The aftermath of the 2015 General Election

One of the biggest talking points in the UK this year has been the General Election that took place on May 7th 2015. A monumental event of national importance, the General Election takes place every half decade, and the results dictate who will govern the country for the five years.

The time around every General Election is a tense period for the UK, as the nation awaits news of changes in leadership that will affect the entire country. But never has this statement rang more true than in 2015, with even experts struggling to predict who would come out on top. It was unsurprising that this election was a seeming two-horse race between the most popular parties that have dominated the political landscape for nigh on 100 years—the Labour and Conservative parties.

Like many opposing forces, both the Labour and Conservative parties stand for completely different policies. Historically, Labour has always sought to champion working-class people, whereas Conservatives have oftentimes lobbied for policies that would favour the more affluent. Therefore, this election has been no different, with Labour and Conservative parties at loggerheads on the best policies that would benefit the majority of the UK population whilst in keeping with their party’s wider ideologies.

Both parties’ policies on the UK housing market, unsurprisingly, were completely different. Labour ruffled a few feathers from landlords and affluent homeowners alike with their proposals to introduce both a Mansion Tax levy on properties over the threshold of £2m, as well as stricter regulatory policies to better govern the rental market against ‘unfairly’ short tenancies and impromptu rental increases. The Conservatives, however, were against these policies, instead placing more emphasis on building more affordable homes and creating ISAs specifically designed to encourage potential homebuyers to save for a deposit.

Naturally, because of these conflicting policies, the UK property market was in relative freefall in the months leading up to the election. Uncertainty definitely clouded the market, with homebuyers, sellers and investors alike all adopting a tentative ‘wait and see’ approach before making any commitments. Landlords and London homeowners alike were particularly wary in the run-up to the election, as both these groups feared the repercussions that would come if Labour gained power and instigated their respective Private Rental Sector (PRS) legislation and Mansion Tax policies respectively.

Private landlords were dreading the effects of the proposed caps on rental increases (which could negatively impact the returns on their buy-to-let properties), whilst affluent London homebuyers were concerned with the financial ramifications inflicted by the Mansion Tax. The Mansion Tax policy posed more of a threat to the London property market than the UK as a whole, because the capital holds the highest concentration of propertie over £2m in the entire country, so naturally the London market stalled more than any other in the run-up to the election.

With so much uncertainty in both the political and housing landscapes, it was unsurprising therefore that property transactions slowed in the months leading up to 7th May. People were hesitant to commit until the results of the General Election, lest their financial situation be compromised by a changing government.

Furthermore, asking prices for homes on the market in the lead-up to the election dropped by 0.1% for the first time in five years, in what Rightmove’s market analyst Miles Shipside has called “an election-driven price stall, which [has given] some buyers onlyshort-term relief from the back-drop of a long-term housing shortage”. Mr Shipside continues: “It seems that pre-election jitters finally came home to roost in the final weeks of electioneering”.

So then, who did emerge victorious in the 2015 General Election?

Surprisingly, despite experts’ predictions of an almost neck-and-neck tie between the front-runners Labour and Conservatives, it was indeed the latter party that came out on top. The Conservatives successfully won another five years in power, although their win was down to a marginal majority. This meant that those hanging back from committing to the UK housing market could now breathe a sigh of relief, safe in the knowledge that they have been spared both the Mansion Tax and a tighter-regulated private rental sector.

As the results filtered in throughout the night and into the morning of the 7th May, there was a huge influx in transactions in the housing market once the Conservatives’ position was secured. In particular, the London market regained its buoyancy almost immediately after the results were announced, with many once-nervous buyers, sellers and investors now secure in the market. This is unsurprising, however, with historical data revealing that the three months after the May 2010 General Election saw a 17% increase in available properties on the market compared to the three months before the election. Therefore, the prediction that the current UK housing market will continue gaining more and more traction in the wake of the results announcement, especially immediately after a pre-election dip, is looking even more likely. The latest figure is that the newly re-elected Conservative government will encourage house price rises of 5% to the year end.

Therefore, this poses the question—what does a Conservative win mean for the property market?

As well as championing a well-publicised Help to Buy scheme (with the party pledging to build 200,000 new homes for first-time buyers under the age of 40 at a 20% discount), the Conservatives have focussed on creating specific ISAs to help potential homebuyers save for a deposit, as well as opening up the Right to Buy scheme to 1.3 million housing association properties among others. It remains to be seen whether the UK’s chronic undersupply of house-building will be remedied in the Conservatives’ second consecutive term in office, which is arguably the biggest challenge facing the country’s property market at the current time. This will require a long-term governmental strategy, particularly when considering that the lack of supply is having such a detrimental effect on the overall housing market at large—the lack of stock is putting upwards pressure on the price of the properties that are currently on the market.

From a landlord perspective though, a Conservative win was the perfect outcome. The PRS has not, and seemingly will not, be regulated, which will no longer pose a threat to the returns generated by landlords’ buy-to-let properties. Also, in the interim, the lack of available supply on the market (particularly in the rental sector) is yet another ideal situation for landlords, who are increasingly enjoying higher demand for their properties, shorter void periods, better yields and a higher level of capital appreciation when they eventually sell their property.

The Conservatives won the election, and as a result it seems that the buy-to-let boom is here to stay.

Manchester Guide vertical - April 2019

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