What Does Our New Prime Minister Mean For Property?
Last updated 12th August 2019 • Lois Arcari • JaeVee
Ever since Boris Johnson walked into Number 10 on the 24th of July, he’s caused quite a stir for the property industry. He’s a character that no one can stop commenting about, no matter which side of the fence they’re on.
There are investors that are hopeful that the former mayor of London will increase affordable properties and bring a much needed boost into property transactions over the UK with his planned stamp duty land tax reform.
Others are put off by his unflinching stance on Brexit - while some say this decisiveness makes the property industry better prepared to deal with any consequences.
With so much debate buzzing around him, here is our unbiased look at what the newest head of Number 10 could mean for property in 2019 and beyond.
Property ownership has always been one of the biggest aspirations for Tory voters, and his Cabinet is taking notice - and promising to take action too.
Johnson has condemned 'the failure of governments for the last 30 years to build enough housing', but optimistically emphasised that he finds the housing shortage a 'massive opportunity’ for the Tories.
It seems he is trying to win back the traditional Tory voters who may have become disheartened at seeing their children struggle up the property ladder.
Will sentiment translate into action?
During his time as Mayor of London, Johnson famously said that he had overseen the building of more affordable homes than his predecessor, the labour Ken Livingstone, ever had.
Labour was then quick to point out that the definition of affordable housing had changed during his tenure.
This definition changed in 2011, and started to include both affordable rent and affordable to buy houses.
Johnson was praised for creating a ‘comprehensive housing strategy’ and releasing surplus land from City Hall, though also being criticised for concentrating this in small areas, and being less active than he’d promised to be and creating small interventions rather than a broader overhaul.
He's approved a wide range of luxury homes, and was vocal about supporting overseas investors in the UK property market.
Boris has spoken out about ‘not over-regulating the market’ and instead allowing the property market in the UK to develop for itself, creating voluntary schemes (such as the London Rental Standard London Rental Standard), instead of creating any broad regulatory policies.
He's also dismissed the idea of rent controls, as he believes wide policy reform would put investors off at a time when the market needs new blood, further compounding the housing shortage.
Differing opinions on the importance of infrastructure
He said he’d ‘lie down in front of the bulldozers’ rather than see a 3rd runway built at Heathrow, citing the effects on house prices in the surrounding area.
However, due to pushes from other ministers and businesses alike, he appears to have softened on the topic - now saying he’d be reluctant to cancel the project entirely, but would like the 'whys' and 'hows' of the project reviewed and potentially reformed.
More broadly, he’s been positive about increased public borrowing to invest in infrastructure, such as pledging to bring full fibre broadband to all areas of the UK by 2025.
Whilst property usually benefits from increased infrastructure spending, some economists warn that such high levels of public borrowing - on top of big investments for the NHS and Crown Prosecution Service - could weaken the UK economy more generally.
That’s potentially worrying, considering that ministers such as Sajid Javid have been advising people not to worry about Brexit specifically because of our generally strong economy - with high levels of employment and rising wage growth offsetting Brexit worries.
The property team
Esther McVey is the new Housing Minister.
Like Johnson, she is in favour of Brexit.
She left her previous post as Secretary of State for Work and Pensions over Theresa May’s proposed Brexit deal.
She hasn’t amassed much experience with housing, other than with her involvement in the roll out of Universal Credit.
She has a record of voting against restrictions on letting agent fees and for the Welfare Reform Act 2012.
Secretary of State for housing, communities and local government
Robert Jenrick is our new Secretary of State for Housing, Communities and Local Government.
Jenrick is young and relatively new to cabinet, entering in 2014 with little policy record to follow.
Many Tories hope that his youth will allow him to bring fresh ideas to Cabinet.
He has voiced his commitment to building homes, saying that “We will focus relentlessly on boosting supply and home ownership, close the opportunity gap and give millions of young people the chance to own their own homes.”
PM’s senior advisor
Sir Edward Lister, the Chair of Homes England, the government’s housing accelerator, has been appointed as Boris Johnson’s senior advisor.
One of his biggest achievements was giving a grant to Ilke homes which is set to see the property group deliver 25,000 new homes over the next few years.
He supports innovation and disruption in the private property market, counting on modern and unconventional property companies to fill the gap of housing demand.
What are the plans
Boris Johnson’s landmark housing plan has been his promise of stamp duty reforms.
He plans to raise the stamp duty threshold from properties worth £125,000 to those worth £500,000+, while lowering the top rate of SDLT from 12% to 7%.
Homemovers and buyers are also optimistic about his plans to move the stamp duty liability from buyers to sellers, in a bid to appeal to young people buying their first homes.
According to estate agent Savills, this would save 300,000 buyers a year from paying the tax.
In fact, Johnson’s ambitions to diminish the tax lead to the FTSE shares going up by 0.2% Stamp Duty during the pre-selection buzz.
In fact, these plans seem like one of those rare goldmines which has got investors and home buyers alike hopeful about the state of the property.
However, some say that sellers will be reluctant to put their homes on the market and would rather keep hold of their oversized properties.
They warn that the property market could face further stagnation or even fall if buyers decide to wait until stamp duty is reformed to complete their transactions.
Eventual shut down of the government’s help to buy scheme
Another housing policy, as of now the scheme is set to be restricted by 2021, and closed for good in 2023.
A report compelled Johnson to set out a strategic review of how the government can support first time buyers with new policies going forward, so that they’re not stranded from the market after the scheme disappears.
There’s some ambivalence about whether or not the scheme will actually be closed off in the allotted amount of time, as it seems like it could alienate the young buyers that the Tories are looking to attract.
But keeping to the deadline does seem like a pretty safe bet.
The National Audit Office has said that the scheme presents ‘a significant market risk’ for the government if the UK does go through a no deal Brexit, because every house within the help to buy scheme was part funded by the taxpayer.
Boris Johnson has kept quiet about his plans for section 21.
Earlier this year the government announced plans to abolish section 21, which allows landlords to evict their tenants without reason.
The government has said this is to curb unfair evictions, especially so called ‘revenge’ evictions, and to stop rogue landlords in their tracks.
The announcement was met with overwhelming appreciation from charities, with the chief executive of housing charity Shelter pleading that Johnson keep the ban.
Landlords have been less enthusiastic about the ban, saying that section 21 allowed them to place eviction notices without going through the bureaucratic process of the section 8 notices they are now expected to use, and say that true regulation of the sector can only be achieved when consulting with both landlords and renters when making changes.
No deal Brexit & house prices
It’s become impossible to avoid the ‘B’ word when talking about the state of UK property in 2019, and it’s fair to say that Boris’ plans for an ‘exit or else’ have defined his leadership so far.
Brexit worries have already seen profits and house prices dip in the first half of 2019, and the Hong Kong investors that seem to have injected new hope into the property market are pulling back from increased uncertainty in their own markets.
There are plenty of reasons to be hopeful, however. Some property experts think that Johnson’s clarity that we will leave the EU one way or another finally allows them to work with some degree of certainty, which was lacking in the ‘will we won’t we’ push backs and negotiations of Theresa May’s Government.
Now it’s clear that a ‘no deal Brexit’ clearly is an option for the UK, there’s more chance of robust preparations from both the property industry and the government.
Indeed, Boris Johnson’s tactic has become that preparations for a no deal Brexit are now the nation’s ‘top priority’, although he’s not yet specified any plans for the property industry in particular.
Most optimism comes from the idea of a ‘Brexit Bounce’ - the idea that property prices will ‘bounce’ back up once the outcome of Brexit is certain, and we’ve actually moved out of the EU.
Indeed, Barclays bank predicts that house prices after Brexit will actually be raised 6% by 2021.
If nothing else, the housing shortage will still be a problem that we must deal with, whatever happens on October 31st.
House building is becoming one of the top priorities for our government and industry, and tenant demand has never been higher.
While some would prefer a 'steadier hand on the tiller', property experts in favour of Johnson argue that he is a bold character who has the track record to support his stance of property building and investment to boost Britain.
Early reports are saying Boris Johnson’s appointment has ushered in a big sigh of relief for the property industry, with lots of experts particularly optimistic about his house building efforts and crowd pleasing promise to reduce stamp duty.
He already has some big plans for the market, and has appointed a mix of relative newcomers and old hand Tories in housing positions to guide the property industry through Brexit.
One thing’s for sure, Johnson fans and critics alike will all be waiting with bated breath to see what his ‘hard Brexit’ stance will mean for property.
Whatever the case, both property investors and general market buyers will want Johnson to act on his promises, take new measures to improve the market, and save the industry from the potential of a Brexit house price crash.