After the shock result on Friday confirming the Conservative party’s new, but narrow majority government, we can now seriously (and impartially) consider what this might mean for the housing and development land markets, in terms of the party’s manifesto pledges.
The Conservatives have pledged to build 200,000 homes for first time buyers at a 20% discount, a policy which should help people (like me, for example!) onto the property ladder. However, these young buyers may end up being frustrated by the party’s widely criticised other pledge – to extend the Right to Buy Scheme through the launch of an £84m Social Mobility Fund. This would see up to 1.3m social housing tenants being able to purchase properties for as little as 30% of the asking price, whilst us young private buyers struggle to pull together deposits. There is a real concern that the Right to Buy scheme might also lead to a reduction in supply of council houses, as there are only plans to replace one in four council houses that are sold off.
However, the Right to Buy scheme will provide funding for the £1bn proposed ‘brownfield regeneration’ scheme, as part of the party’s plan to “ensure local people have more control over planning and protect the green belt”. This scheme will mean that local authorities must maintain a register of available brownfield land and ensure “90% of brownfield sites have planning permission for housing by 2020”. This move alone could enable councils to construct up to 400,000 new homes with supporting infrastructure by cleaning up previously developed land. If these numbers were to be realised, experts have suggested that 430,000 new jobs could be generated, along with £432m of additional investment in local infrastructure and £13.6bn in economic output.
To ensure that these brownfield sites are redeveloped, the party plans to establish a new “London Land Commission” and to double the number of Housing Zones which could create 95,000 new homes, a third of which will be affordable homes.
However, there are no plans at present to introduce taxes on overseas investors who could be the ones buying up these homes. This is particularly noteworthy considering the rush of foreign investors to the London property market since the election result last Friday, largely in light of the removal of the ‘mansion tax’ threat. In fact, experts have already been so bold to suggest that there will be a surge in house prices over the next five years, with expensive homes (£2m plus) increasing in value by 20%. Subsequently, there has also been a jump in the share price of London estate agents such as Foxtons, who saw a 12% increase at the end of last week.
The manifesto continues to give planning power to communities, by supporting “locally led garden cities and towns in places where communities want them, such as Ebbsfleet and Bicester”. There is also to be a new ‘Right to Build’ initiative requiring councils to allocate land to local people to build or commission their own home, as you can do in Europe. Furthermore, when new homes are granted planning permission, the party “will make sure that local communities know up-front that necessary infrastructure such as schools and roads will be provided”.
Overall, the Conservatives remaining in power will provide political continuity that could benefit the housing market, in the short term at least – this was reflected by the jump of the FTSE 100 by 2.3% at market close on Friday 8th May following the result. However, we should not forget the ‘elephant in the room’ either – the ever more imminent issue of an EU referendum. This looming issue is likely to detract from the attractiveness of London to US and Asian foreign markets, which could be damaging as the property market is only now beginning to stabilise again.
So good luck to the new cabinet and in particular Greg Clark, the new Communities and Local Government Secretary – we will be watching with interest!