The impact of the election on the housing market
6 May 2015
Thankfully it is nearly over: the much-hyped General Election is almost upon us. It feels like the wait has dragged on forever, with each day bringing yet another ill-conceived proposal, such as Labour’s suggested extra Stamp Duty for foreign property buyers from outside the European Union.
Although the outcome appears far from certain, what we do know is that this election has taken the wind out of the sails of the top end of the property market. Signs of concern have emerged, mostly because we are seeing the culmination of many different tax changes coming together.
The impact of the most eye-catching proposal, Mansion Tax, will be more limited than many people think but it is more about fear of the unknown. As more detail emerges, it is obvious that its effects won’t be as brutal as originally feared - at least for those owning homes valued at just over £2m. For someone with a property value of £2m to £3m, the suggested charge will be £3,000 per year, but as you move up the scale, costs become considerable - £40,000 per annum on a £10m home or £125,000 on a £20m-plus property.
Yet for most people, Mansion Tax will have less of an impact than the recent Stamp Duty reform. This was the Tories’ big policy change with regard to housing, and it has already had a huge impact on the market.
Labour’s proposal of abolishing Non-Dom status, on the other hand, will affect a relatively small number of people in real terms and won’t have as positive a financial impact on the Treasury as Labour expect. The reality is that any changes will bring the UK into line with other countries, although it will make London and the UK a little less appealing to wealthy Brits.
Once the election is over, there is a strong chance that there will be no clear winner. There is a general feeling among the property industry that if the Tories get back in, prices may edge up as confidence returns. On the other hand, if there were no outright winner, which is more than likely, a Labour/SNP coalition – although ruled out by Ed Miliband – would probably result in a softening of prices.
What does it mean for buyers? It is generally better to buy at a time when there is less competition from fellow buyers and therefore more room for negotiation with the vendor. There may be a window of opportunity until certainty returns, which the way things are going, could be several months from now.