We can’t talk about the property market without mentioning politics. Whilst the two have always been intertwined, our current political climate has made the link between the pair more obvious than ever before. In this article, we’re going to discuss the impact that political decisions have on the property market, and why politics matters for those looking to buy or sell a home.
With regards to managing the housing market, the government has three distinct objectives. Its primary aim is to secure housing supply, and ensure the availability of affordable homes for those who need them. Secondary aims include reducing outstanding debt levels, and controlling the impact of non-primary residential ownership, such as buy-to-let landlords and those with second homes.
Policymakers have focused on the government’s property sector objectives for decades, making decisions aimed at tackling common problems in the sector. In recent years, we’ve seen the introduction of numerous schemes designed to provide greater opportunities for those hoping to purchase a home. These schemes include Help to Buy, the Help to Buy ISA, Shared Ownership, and the Starter Homes Scheme. But none of these ideas has proved entirely successful, and so issues surrounding the availability and affordability of homes have remained.
In 2016, the problems affecting the property sector were impacted quite dramatically, by the result of the Referendum. June 2016 saw 52% of voters opt to leave the European Union, a decision which (at the time of writing) is yet to be realised. Brexit is of course a political decision, but its impact with regards to property is far reaching.
The property sector has been hugely affected by Brexit already, with many issues revolving around the uncertainty that this decision has created. With uncertainty comes cautiousness, and UK property purchasers have certainly followed this trend. As a result of an unclear future and a confused political landscape, discretionary purchasers have become far more careful. And this new hesitant nature is entirely understandable.
Now, buyers must be aware of the fact that anything could change. Housing supply may well increase or decrease, affecting prices accordingly. Likewise, the direction that interest rates are heading in is yet to be revealed. So, buyers must think carefully about what they can afford now, and how they would manage a change in interest rates that could drastically impact their mortgage payments. With Brexit still on the horizon, it’s not clear when such changes would happen, or even if they will at all. Unsurprisingly, that’s making buyers reluctant to commit to purchases.
The Royal Institution of Chartered Surveyors reported slow growth in house prices in January, and a decline in inquiries, new instructions and sales in December. It attributed this to “ongoing uncertainty about the path to Brexit dominating the news agenda.”
Prime Minister Boris Johnson has outlined a series of proposed changes aimed at boosting the property market. These include a reduction in stamp duty for properties valued over £1.5m - down from 12% to 7%. Responsibility for paying stamp duty will be shifted from buyers to sellers, and Johnson has proposed a reduction in the tax burden for properties valued at under £500,000. No provisions have been announced regarding those seeking to downsize, however.
Whilst changes like these are intended to boost the market, all changes do breed uncertainty and cautiousness to a certain extent. Any alterations to legislation and policies must be thought through, and fully digested by all those considering buying or selling a UK property. Only once these changes have been introduced and fully understood, will we see what impact they will actually have on the property market. None of these policies has been formally implemented yet, so buyers and sellers await clarification on a broad range of different issues.
The link between property and politics is a powerful one indeed. The current turbulent political landscape has inevitably caused many vendors to postpone sales, and potential purchasers to delay their decision-making. The end result is a slowing down of the market, which shows no sign of disappearing just yet.