The UK’s property market has gone through some significant changes over the past year. 2014 saw massive growth in house prices, especially in the capital. Stamp Duty has been reinvented, now emulating income tax and saving home buyers money. Renting is becoming the norm for young people.
However, now the market is at a stand-still with house buyers wary to proceed. The next general election takes place on the 7th of May, and no one can predict who is going to win or what the consequences will be.
One of the Labour party’s plans in particular has attracted a lot of attention over the past year. They promised a new Mansion Tax, created to fine properties worth more than £2million, which has caused a lot of controversy.
90% of houses affected by ‘Mansion Tax’ will be in London
For one, it is estimated that around 90% of the properties affected will be in the Greater London area, since house prices there are simply more expensive. Investors, who might be typically attracted to the capital’s global reputation, don’t want to pay for a property which will later incur a new tax. The other part of this tax’s notoriety came from how unwilling Labour initially were to come up with the price per mansion.
Recently though Labour have revealed how much the tax will actually cost. Properties from £2 million and £3 million will only incur a £3,000 tax, which is much lower than many expected. Critics have pointed out that Labour intended to raise £1.2 billion with the profits of Mansion Tax, and this only covers approximately £300 million. To this, shadow chancellor Ed Balls points out that “houses worth £3m, £5m, £10m will pay proportionally more”, making up that money.
The Conservatives had already made a profit out of the property market with their reforms to Stamp Duty. The Conservative party conference plans were revealed to spend money building on the ‘Help-To-Buy’ scheme. This initiative was formed to help house buyers onto and up the property ladder by reducing deposit prices to 5%. The Government have hailed Help-To-Buy a success, pointing to the 73,000 sales the scheme has created.
If re-elected in 2015, David Cameron has pledged to help first time buyers even more. He wants to build 100,000 new homes. House building has long been a problem in the United Kingdom, with far too few being built to keep up with demand. The Conservatives say they will build on brownfield land; to help future tenants avoid various taxes. Cameron was also eager to say that these houses would be ring-fenced for UK house-buyers under the age of 40.
Each political party has its own priorities, policies and promises. Even official house price forecasts are preceded with disclaimers, warning that they can’t predict exactly whether prices will rise and fall whilst the country’s political future is so unsure. Tim Moore, senior economist at Markit, said: “Heightened political and economic uncertainty may be dragging on households’ expectations for their property values over the course of 2015.”
“Savvy investors are staying far away from the capital”
These days, savvy investors are staying far away from the capital, which is bound to suffer the most property turbulence after the election. Instead, people are looking to the higher yields and steadier growth of regional locations. May the 7th is set to be a momentous day, but who will come out victorious and how they will effect the property sector, is impossible to predict.