By Andy Noton
The unexpected election win by the Conservative party has removed the uncertainty that an indecisive election result would have brought to the property sector. In their manifesto, the Conservatives made a number of pledges to encourage the supply and ownership of homes. In particular:
- Increasing the number of first time buyers to more than 1 million homeowners.
- Extending the help to buy scheme to cover 120,000 homes, thereby allowing 200,000 people the opportunity to buy.
- Introducing a help to buy ISA for first-time buyers, effectively meaning that if you save £12,000 as a first-time buyer you will receive another £3,000 from the government.
- Building 200,000 starter homes over the next five years and selling these at 20% below market value to first-time buyers under the age of 40.
- Building 275,000 affordable homes by 2020.
- Building 10,000 new rental homes and renting these below-market rates.
- Doubling the number of self build homes before 2020 by requiring councils to allocate land to local people to build their properties.
- Extending the right to buy policy already in existence for council house tenants to tenants of housing associations.
More general pledges not to raise income tax, VAT or national insurance during the next parliament will also provide certainty to property investors.
For those involved with the London prime market, the Conservative win has been particularly good news. Firstly the market will not be subject to Labour or Liberal Democrats’ mansion tax plans. Similarly, non-doms no longer need to be concerned about their tax status. Both of these issues had contributed to a dampening in demand prior to the election but according to reports, this trend has already reversed since the election. With property values in this part of the market expected to increase by 25% over the next five years, it is potentially a real boon. There are, however, concerns about an EU referendum. Should the UK leave the EU this would most likely have a negative impact on investment and the attractiveness of the UK property market to foreign investors.
However, new taxes (such as annual tax on enveloped dwellings and capital gains tax on residential properties owned by non-residents) introduced in the last parliament by the coalition could indicate that property could be seen as an area to increase taxes, especially on inward investment.
The Conservatives’ pledges not to raise income tax, national insurance or VAT, limits the area in which further tax revenues could be raised to reduce the deficit. Capital gains tax on commercial properties could be a possibility given this would presumably be popular with the general electorate but it could significantly damage inward investment into the UK that must go a long way towards financing the UK’s balance of trade deficit. Other possibilities could be business rates where a “fundamental review” has been promised, although no undertaking on decreasing business rates (or any replacement) has been given.
I will post further updates when more information becomes available. If you would like to discuss any of these issues or, more generally, how I can be of assistance to your own business on any property tax or accountancy matter, please do contact me.