Housing was a key issue during the election campaign for all political parties, with the Tories proposing to extend Margaret Thatcher’s flagship Right to Buy initiative to fund further housebuilding, as well as continuing its popular Help to Buy programmes for first-time buyers.
But without any concrete policies that look set to address the market’s biggest problem, supply, property expert Henry Pryor called the election result ‘a good night for home-owners’ but ‘a bad night for housing’.
“Housing was one of the main issues of the election campaign but looks likely to be kicked once again into the long grass. House prices will bounce on the outcome up by 5% by Christmas. Rents will continue to creep up whilst the woeful volume of new homes being built will look like the Liberal Democrat share of the vote.”
Dominik Lipnicki, co-owner of Your Mortgage Decisions, says projects launched so far to support first-time buyers, including the Help to Buy ISA, looked attractive at the outset but were limited in provision.
“They’re more gimmicky to show the electorate that they’re doing something, but I haven’t seen a proposal that will make a significant difference.”
Increased certainty
However, news of a Conservative majority on Friday has seen interest from overseas property investors surge, with prime estate agents reporting a jump in phone calls following the election result.
As Labour threatened to impose a Mansion Tax on properties over £2m if it secured a majority, investors were believed to be holding out on prime London purchases prior to the election.
Grainne Gilmore, head of UK residential research at Knight Frank, said news of a Conservative government had brought back certainty to the housing market.
“As a result of this increased certainty it stands to reason that people who were holding back because of worries about the election result can now go forward with any of their planned property investments or property purchases.”
There was also further good news for UK landlords with the Conservatives proposing a more relaxed approach to the private rental sector than its Labour opponents, which sought to introduce rent controls and a national landlord register, among other changes.
But Brian Murphy, head of lending at the Mortgage Advice Bureau, said small print in the 2015 Budget that intends to make it easier for private tenants to sub-let a room could ‘cause a headache’ for some landlords.
“The biggest concern for landlords is that this will make it easier for tenants to re-rent the property or rooms to other renters. This also increases the risk of rent-to-rent scams, whereby a middle man poses as a normal tenant, converts shared living spaces into extra rooms and then charges rent for on an individual basis at a much higher price than they are paying the landlord,” he said.
Right to Buy
Perhaps the most controversial of the party’s housing policies, however, is the decision to extend the current Right to Buy scheme to allow 1.3 million eligible social housing tenants to purchase their council home.
Councils will be required to sell the most valuable 200,000 homes from their remaining stock, from which the government will use cash proceeds to build 400,000 new homes on brownfield land.
With the government still to confirm a plan to replace social housing stock, industry experts expressed concern over an already low supply of social housing and greater pressure on the current housing shortage.
Tighter lending rules following the Mortgage Market Review could also have an impact on Right to Buy tenants, according to Pryor.
“It’s not clear if housing association tenants would meet the new, stricter lending criteria if they need a mortgage, most are on benefits or the smallest of wages. Right to Buy is another demand-side answer to what is a supply-side problem.”
And as the Bank of England held the UK interest rate at 0.5% for another month, opportunities are in abundance for homebuyers and remortgagers.
Lipnicki said there was still a gap in the lending market for high LTV mortgage products as the norm and a focus on affordability criteria.
“What we would like to see is a more intelligent, sensible approach to underwriting criteria. We are still very disappointed to see people who are effectively mortgage prisoners even though they’ve paid their mortgage on time every time and never missed a payment.
“All too often they are unable to go on a better, stable fixed rate and I think the upcoming Europe meddling is not going to help that, it will only make that worse.”
