Friday 19 June 2015

Election result is a boost to the housing market

Many will be pleased with the certainty and continuity the election result has given in regards to the handling of the U.K’s finances and its housing market.

Housing had been a hot topic before the election. With house prices having risen 18% during David Cameron’s first term in office, there was an ever-increasing divide between the haves and the have-nots in the housing market.

One generally accepted reason for the U.K’s continual rise in house prices is that we aren’t building enough new homes. Housebuilding has been on a continual downtrend ever since the Seventies, with 378,320 new homes built in 1970 compared to just 140,930 last year.

This decline is so ingrained that the coalition’s four years in government coincided with all four of the lowest years of housebuilding on record.

chart showing number of new homes built in the uk vs average house prices

It will therefore be interesting to see if David Cameron really can reverse this forty year-old trend and deliver the 200,000 new homes for first-time buyers and 275,000 affordable homes by 2020, as he promised to do in his election manifesto.

With a generation of people having witnessed the price of an average U.K home leap from £4,582 in 1970 to £188,566 today, it’s no wonder so many choose to invest in property.

Commentators predict even more will now want to enter the market, fuelled by April’s pension reforms. In addition, a recent survey showed 25% of existing landlords expect to increase their portfolios this year, with 60% of respondents thinking now is a good time to invest.

This view may well have strengthened further since the election results, with many landlords previously fearing the impact Labour’s proposed tenancy reforms and rent caps would have had on the market.

In contrast, the Conservatives made little reference to the private-rented sector in their manifesto and have previously resisted calls for major reforms of the industry. This should instil a renewed confidence for investors, whilst the expected wave of pension money could increase activity in the market as well as property prices.

Other positive pre-election pledges from the Conservatives included a helping hand for aspiring homeowners, with the introduction of the Help to Buy ISA and an extension of the Right to Buy policy. They also proposed scrapping inheritance tax on family homes worth up to £1m.

The renewed stability for the country alongside all of this support towards the U.K’s culture of homeownership should contribute towards an increasing demand for property, whilst the on-going housing shortfall should drive house prices higher. 

the business magazine june 2015 front cover

(This article was published in June 2015's
The Business magazine, which can be viewed online here)


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