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Election impact on the UK housing market

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Downing StreetThe London housing market breathes a collective sigh of relief after UK General Election

Those within the property industry are welcoming the general election result. Although the UK is certainly in the midst of a housing crisis with particular issues within the private rental sector, the Labour party’s proposals for housing reform were widely regarded as counterintuitive.

One of the first and most widely publicised proposals was the Mansion Tax. Initially conceived by the Liberal Democrats, this policy would have seen an annual tax imposed on all properties valued at £2 million and above. Even after the Liberal Democrats backed away from this policy as unfeasible and unfair, Labour continued to champion the tax, making it a central tenet of their manifesto. Thankfully the prospect of such a tax along with Labour’s rent control proposals have been eliminated

The City of London has resolutely welcomed the Conservatives’ win. The party warned of French-style post election stock market crash. Thankfully, this was avoided and the FTSE and Sterling both saw strong gains in the wake of the election result. Even before the election, most voters stated that they trusted the Conservatives with the economy more than Labour, even if it meant further years of austerity.

Some of the Conservatives’ proposals are controversial, particularly the expansion of Right to Buy which will take social housing out of the rental sector. This will inevitably force more people into the private rental sector, increasing demand and in turn, rents. Greater supply within the sector will be needed to keep properties affordable.

Capital values would have increased regardless of the election result, given that the population of London is expected to grow by 1.5 million over the next 15 years. With the prospect of the Mansion Tax and rent controls eliminated, capital values are expected to increase at a faster rate than would normally seen in a post recession economy.

It is also anticipated that sensible measures to make housing more affordable, including encouraging further housebuilding, the promise to keep the top rate of income tax and national insurance at current rates, and increasing the inheritance tax threshold to £1m for properties being passed onto children are welcome by the property industry.

7 Beaufort Gardens, Flat 4, SW3 1PT - Exterior - 06-12.2013We anticipate there will be an increase in transaction levels after a subdued first and second quarter. Properties valued at £2 million and above which were threatened by the prospect of the Mansion Tax will certainly see increased interest. Over the long term, investment in the London property market seems to be a safe bet.

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Marc von Grundherr

About the Author

Marc has been a director at Benham and Reeves since 2001 and works closely with Managing Director Anita Mehra in the growth of the company in all areas from investments to sales to rentals and tax. You may have seen Marc within the UK and international media on a regular basis where he is now the property expert of choice for multiple news organisations including the BBC, Bloomberg, Reuters, The Times, Telegraph, Financial Times, News UK and more. His analysis in always well-informed and topical and delivered with a professionalism and passion that news producers seem to like. He is never short of an opinion on the property market. Marc is also an experienced panellist and webinar host especially when curating subjects such as property investing and the economics of housing domestically and overseas. He leverages his long-term investor contact-book well and is always happy to provide advice and insight to would be property speculators.

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