February 2010

Monday, 01 February 2010

How will the result of the general election affect the property market?

 

At Hadley Taylor we are preparing our business for an increase in transactions in 2010. We expect to do 40% more transactions this year than last. Last year we did 80% more than the previous year. This sounds impressive but I have to add here that 2008 couldn't have been any worse if we'd been writing a horror movie script. This predicted increase in activity is due to the fact that many buyers and sellers have put their plans on the back burner during the last couple of years but many of these folk will see 2010 as the year to move on. The obvious blot on the landscape this year is the general election in May.

Election year is always a time of uncertainty for the housing market. Estate agents tend to want to see the back of elections as soon as possible because they lead to uncertainty in the minds of buyers and sellers alike.

 

So let's look at some of the possible outcomes and their effect on the housing market.

 

Labour could still win it of course, due to the legion of voters who make up the client state. Under a fourth term of Labour we could see the housing market become an area the government targets to raise more tax in its efforts to pay down the deficit. We could see increases in stamp duty and the introduction of capital gains tax on your primary residence. Estate agents may face more legislation of their businesses under Labour as we have seen in recent years and this will inevitably push up the cost of sale.

 

The worse case scenario however is for a hung parliament. A hung parliament would result in a weak government with little power in the House of Commons to push through the sort of measures required to reduce the deficit at the necessary rate. The consequence of this could be a downgrading of the credit rating of UK plc or even sovereign default. A hung parliament, although unlikely, is a possibility and would be very bad news for the economy and the housing market resulting in a double dip.

 

If the Conservatives win we could see a more settled second half of the year for property but the sobering numbers that will come out of the treasury once victory has been secured will keep the lid on growth in the economy, wages and consequently in house price inflation for some considerable time as the age of inevitable austerity begins. David Cameron has pledged to scrap home information packs if the Tories win power. The controversial packs have already cost sellers about £700m during a time when the housing market could have done with a break so this will be good news to some. The Energy Performance Certificates which I have to say are probably the most useful part of the packs will probably stay under the Tories however and this can't be a bad thing. The much heralded increase in the inheritance tax threshold will be welcome news for all those elderly people hoping to leave their property to the next generation.

 

Whatever the outcome of the election, I think we are in for the most fascinating few months we've had in this country for about 30 years.