Potential impacts of a Labour victory on the real estate sector during the general election
As Sir Keir Starmer steps into Downing Street, the new Labour government is set to introduce a series of housing policies aimed at addressing the UK's housing crisis. With a landslide majority in the general election, the focus is on building more affordable homes and easing the burden on renters.
One of the key proposals is the Labour manifesto's pledge to build 1.5 million new homes, a significant increase from the current rate of housebuilding. The success of this ambitious target depends on the engagement and cooperation of local authorities, developers, and communities.
To help young people onto the housing ladder, Labour plans to make the Freedom to Buy scheme permanent, aiming to help 80,000 young people secure their first homes. The scheme, which currently offers a mortgage guarantee to lenders, could be a valuable step towards increasing home ownership among the younger generation.
In an effort to protect renters, Labour's manifesto promises to immediately abolish Section 21 evictions. This move, which aims to prevent private renters from being exploited and discriminated against, could lead to a surge in landlords serving notices before legislative changes take effect. However, the Renters Reform Bill, which scraps section 21 notices (known as 'no-fault' evictions), is currently going through parliament.
To address concerns about affordability, Labour plans to reduce the first-time buyer stamp duty threshold from £425,000 to £300,000. Additionally, they intend to increase the stamp duty rate on purchases of residential property by non-UK residents by 1%.
There are also concerns that Labour could target capital gains tax (CGT) as a means of raising revenue. Lowering the CGT threshold or increasing the CGT rate could bring another threat to landlord profits when exiting a buy-to-let portfolio. Slowing rental growth has led many landlords to question the viability of buy-to-let, and these potential changes could exacerbate their concerns.
The new government has not yet announced any specific regulation to accelerate housing construction, but Sir Keir has spoken of the need for more affordable homes. With interest rates remaining high, impacting house price growth and property sales, there is hope that slowing inflation will encourage the Bank of England to reduce interest rates, which could boost the housing market.
However, meeting such ambitious housing targets requires significant resources, substantial investment, and careful planning. The road ahead may not be easy, but with a clear focus on affordable housing and renter protections, the Labour government is poised to make a meaningful impact on the UK's housing crisis.
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