Property market would suffer under Labour proposals
A Labour-led government would likely hit homeowners with a combination of falling house prices and rising interest rates, warns leading property website Zoopla.
The state of the UK property market is a key driver of consumer confidence, and hence the economy as a whole. A drop in house prices can have a significant knock on effect on the wider economy with lower consumer spending, especially in the UK due to our high level of home ownership and the correlation of wealth perception with the performance of the property market.
The outcome of this week’s election is likely to have a significant impact one way or another on the UK housing market. Property prices have risen 9.7% on average across the country over the past five years under the current government largely due to an improving economy, higher employment and policies designed to further encourage property ownership and investment.
As a result, a continuation of the current coalition would likely result in the continued recovery in the housing market.
However, Ed Miliband’s housing market policies, whether by design or accident, will make UK property generally a less attractive investment. It will appear less attractive to owners as a result of proposed new property taxes, less attractive to landlords and investors as a result of proposed new rent controls and less attractive to first-time buyers and lenders as a result of proposed changes to current government support schemes. The follow-on impact of falling house prices and lower consumer spending to the overall economy could be significant.
Lawrence Hall of Zoopla said: “There is no question that there are issues to be resolved in the UK property market, including a possible tax on unoccupied residences, an update to council tax bands, clamping down on rogue landlords. The most important way to solve the UK’s housing issues is to build more homes – not destroy the value of those already built.
“The proposed mansion tax is a great example of a good political soundbite but a poor policy. It started out as an idea to tax billionaire non-dom property owners and has turned into a proposed tax on working British families. UK homeowners already pay the highest property taxes in the developed world, so the introduction of any new tax would be value destructive to the entire UK property market. But using a sledgehammer to crack some of these walnuts by further taxing working Brits primary residences and imposing controls on all landlords and tenants is dangerous to the health of the overall housing market.
“And this isn’t the only Labour proposal that would have damaging repercussions for the housing market. Rent controls threaten to upset the apple cart in the lettings market. The more red tape that is introduced, the more people will be dissuaded from investing in property, a key aspiration for working Britons.”