The housing market could be heading into a summer of political speculation following Andy Burnham’s first speech as prime minister-in-waiting last week, which outlined an ambitious vision for housing but left many of the details unanswered.
Among the ideas expected to shape debate are potential reforms to capital gains tax, the replacement of stamp duty and council tax with a land value tax, the largest social housebuilding programme since the Second World War and greater devolved tax-raising powers. However, with no detailed policy proposals yet published, the sector is likely to spend the coming months assessing what, if any, of these measures will ultimately be adopted.
For property professionals, the uncertainty comes against the backdrop of Labour’s previous target to deliver 1.5 million homes – commitment that has yet to be achieved – leaving many in the industry waiting to see how rhetoric translates into policy.
The difficult financial choices facing Burnham were no doubt brought home to him last week by the reported £4.7bn shortfall in the Defence Investment Plan.
Furthermore, questions of legitimacy around the new prime minister will increase the further he drifts from the 2024 Labour manifesto, said former Treasury special advisor James Nation.
For the prime London property market, it signals another summer of speculation ahead of the autumn Budget.
With the government seemingly unable to cut spending meaningfully or introduce broad-based tax rises, we could see a repeat of last year’s smorgasbord approach of smaller wealth-based rises like the higher-value council tax.
“The people who create businesses, back innovation, employ staff and support philanthropy are not an enemy class,” said a spokesperson for Foreign Investors for Britain in response to Burnham’s speech. “If Britain sends the message that success will simply be taxed, vilified and raided, many of those people will not stay to fund the next phase of national renewal.”
The annual price decline in prime central London (PCL) was 3.6% in June for the second month running, but there is still downwards pressure on activity as the lending landscape becomes tougher and political uncertainty intensifies.
Knight Frank’s head of UK residential research at Knight Frank, Tom Bill, commented: “The number of transactions in PCL in the year to June was 14% lower than the previous 12 months, Knight Frank data shows. That said, the number of offers made was only 4% lower over the same period.
“The more needs-driven and domestic market of prime outer London is proving more resilient. Average prices fell 0.4% in the year to June, meaning they are at the same level as they were in June 2022.
“The number of transactions in the year to June was 7% down on the previous 12-month period while the number of offers made was up by 5%.”
Meanwhile, the cracks from the Middle East conflict and associated rise in mortgage rates began to widen last week in the wider market. The number of UK mortgage approvals fell 14.8% to 56,205, which was the tenth largest monthly decline since records began in 1993.
Transaction numbers also fell 2% between April and May HMRC data showed, highlighting the absence of a seasonal spring bounce.
“The latest declines have more to do with the Middle East conflict than rising domestic political uncertainty, although energy prices are coming under control as both sides move gradually towards a ceasefire,” Bill added.
