How election outcomes could affect the property market

With the General Election just around the corner, the final outcome is still difficult to predict.   However, whether we have a change of Government after the election or not, the outcome is likely to be a defining moment for the property market, especially in terms of how property information, future housing supply/demand, and technological developments will be affected.

The Conservatives have stated (in no uncertain terms) that they do, indeed, plan to abolish HIPs.  The speed at which the consultation and suspension process is conducted will ultimately be a question of priorities. In the housing team, will HIPs really be a big deal when compared with “the big society” ideals on planning and house building?

Even so, the Conservatives are committed to removing regulations in this area, and to letting market forces dictate the future demand for upfront packaged property information. Grant Schapps has been consistent in his view that HIPs could be gone within three-to-four months, which has been given a further boost by the surprise change in the Liberal Democrats’ manifesto, which expresses this same sentiment.

Personally, I foresee more focus on the EPC, especially if a Conservative/Liberal Democrat coalition is formed. Both parties have expressed a desire to enhance the EPC and deliver value off the back of it, such as the Conservatives’ “Green Deal”. There could be a meeting of minds on this area of policy to drive energy efficiency further within the housing stock.

With the market still sceptical over Exchange-Ready HIPs, buyers’ solicitors will always be suspicious of relying solely on information supplied by the seller, and will therefore want to obtain much of this information for themselves. It’s possible that a return to pre-HIPs property information could be accelerated to fill the void. At the same time, budget constraints and a need to streamline processes at a local authority level will necessitate driving down costs to meet the requirements for reduced prices for property search information. This could liberalise data – or constrain the speed at which it can be delivered – depending on how much investment is put into service delivery.

If re-elected, Labour will continue maintaining the existing momentum that HIPs have in the market. Many agents accept that HIPs have been in place for some time now, and welcome the margin opportunities that they can create. The CLG review over the summer may take a more detailed view at some of the remaining dysfunctions.  Although this should be welcomed, I do not believe this review will yet address the fundamentals of why property information from source-to-consumer needs a root and branch reform.

In terms of the general health of the housing market economy, no matter which party wins the election, lending criteria by the main banks and building societies remains the overall driver of supply within the conveyancing industry.

The economy remains uncertain and those that trade forex report increased fluctuations in the exchanges which show no sign of stabilising for the time being. Clearly, with a deficit of more than £160 billion, the banks can expect further taxes on their profits. As a result, the banks will redouble their already considerable focus on risk when making lending decisions, resulting in even tighter requirements for borrowers and an increase in interest rates.  This, together with rates of employment, are the key factors affecting the health of the housing market, rather than any stamp duty reduction or HIPs being suspended for first time buyers.

Housing supply and demand is teetering on a knife edge at present.  It’s clear that the pace of house building needs to accelerate to match that of household creation. Under a Conservative government, new local housing trusts could give residents a direct say in what their local needs are, but could also stall planning decisions in a morass of “nimbyism”.

Although Labour has pledged an eye-catching figure of £105 billion to support house building, this needs to go hand in hand with reform of the planning process to ensure that house builders have the confidence to invest and to meet the demand, and also requires confidence by the banks in their capital lending.

As I write, there is an unprecedented build-up to the election, with a hung (or balanced) parliament very much in the offing. The key for the property market is whether this comes with a consensus for meaningful change to satisfy and create housing purchase, as well as concrete plans to reduce inefficiencies and concentrate on investing in market led technological innovation.

On technology, all parties have expressed their support for further e-Government as a way of managing down the deficit by reducing inefficiencies and driving down costs. We see a future where information is delivered electronically, from source to all parties visible in the transaction. This requires a new vision on the ideal platforms needed to connect the conveyancing industry together, including serious conversations about how data and documents are managed through the process. If it can be more efficient, lower risk, more transparent and quicker, it must surely benefit all of us, while also addressing some of the main dysfunctions that have led us to where we are today.

In the tightest election for a generation, one thing is certain:  there is a real appetite for change.  The question now has to be whether the property industry will feature centre stage and be reflective of the mood.

Written by David Kempster, Marketing Director at MDA SearchFlow


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11 Responses to “How election outcomes could affect the property market”

  1. In 1987 the average house price was £40k.
    In 1997 the average house price was £55k.

    A 33.3% increase over ten years.

    From 1997 to 2007 the Average house prices rose from £55k to £190k.

    A staggering 245% increase.

    Housing professionals are laughable.

    As a FTB I will not be buying my first house, until the average house in my area returns to 3x -3.5x my salary.

    I will be buying when houses return to their 1998 sold prices.

    End of converstion……..Comprehendo Mr Estate Agent?

  2. Another FTBer Says:

    Agree with FTBer at 3.51 pm

    Regards.

  3. confused FTBer Says:

    how does suspending HIPs help FTBers? are these not for sellers?

    i agree with FTBer, prices are stupid and a BIG correction needs to happen, but the greeed is too much for those in the industry

  4. FTB here as well.

    Whats the point anymore?

    Buy 1 half decent property in a half decent location for a not so half decent price.

    Obtain morgage from the banks who have gotten us into this big mess who know the higher the property price, the bigger the wallets get.

    I have been employed in a good job for 5 years now paying me £30k a year and i still stay with my parents and sisters. Never had debt, never had a credit card but yet all my savings (the money i put in the bank which they used to give to careless people wanting big fancy cars etc) are gathering zero interest.

    Whats the point? this country is in ruins.

  5. well that is most certainly not going to ever happen in anyones life time – that’s for sure! If you think house prices are going to come down to 1998 levels well that’s like saying lets rewind inflation to 1998 levels and make all the prices of all good & services to be at 1998 prices. Very simple and logical answer. I’m sorry to ruin your dreams guys but I’m afraid house prices is here to stay and will continue to rise and rise in the longer term starting from now (perhaps we’ll see another little blip in the system i.e. market failure or correction by 10% to 15% but that’s about it (every 5 to 10 years or so)).

    So if I was you, I would stop thinking and worrying about the past and start planning to buy a house at your earliest convenience! Otherwise, good luck y’all…

    End of conversation! Comprehendo mr FTBer? lol…

  6. LoL at the typical Estate Agents response.

    Dont worry folks. Sul doesnt understand the reasons why the property market rose by 245% from 1997 to 2007…..

    Expect a 60% reduction from peak.

  7. FTB here too.

    Agree with what FTBer said.
    Hoarding multiple props needs 2 end.

  8. Also agree with FTBer, why do you think we are in this mess sul ?, yes it was caused by house price inflation and banks lending to keep this bubble going. We will not have low interest rates forever and banks now have seen the errors of their ways. wages have not kept up to pay for this rise in prices. the whole market is constantly being ramped, sellers still think they can obtain high prices. More homes need to be built. According to suls logic are we to expect another 200% rise in the next 10 years.

  9. Hello Sul.

    As Chancellor Brown abolished dividend tax credits on pension funds in 1997 to raise money.

    Brown then raised taxes in retirement on any income you may have above what is left of the state pension. As well as destroying the value of pensions for the people who have started employment from 1997 onwards, working for companies who used to offer good contributory/private stakeholder pension schemes.

    The smart companies saw the writing on the wall and immediately ended their final salary pension schemes to new employees shortly after the ‘Brown raid’ in 1997. They also started to cut down on the number of people with long final salary pension service.

    If you were a forward thinking corporate financial planner in 1997 you could see the “red” signs of debt and New Labour flashing ahead and worked towards ending a scheme which would no longer be viable, unless as in the public sector ,it is guaranteed and underwritten by the tax payers

    The CBI opposed the cuts. Even the treasury and No.10 opposed them.
    But Brown did it anyway.

    Before the Budget, an 8p net dividend would have carried a 2p tax credit, giving a 10p gross dividend. By abolishing the tax credit, the yield for institutional funds across the entire market fell by 20 per cent. Few people outside the City understood the change and hardly any MPs protested. But Whitehall papers produced under Freedom of Information show that Mr Brown was warned by his officials that there would be dire consequences.

    They warned it would wipe £50bn off the value of funds, and that shares could drop by up to 20 per cent and public sector pensions would need topping up.

    In fact pension funds have lost around £5bn per year since 1997.
    Pension funds holding the cash that you, me and almost everyone else in the country plan to use for our retirement have lost around £100 billion over the last 12 years.

    The advice Brown was given by this Treasury Paper, in 1997 was as follows:

    ‘The changes in incentives are likely to lead to substantial changes in portfolios. Pension funds will find equity relatively less attractive, and will prefer other assets – particulalrly interest bearing securities and foreign equity – and may also be prompted to consider more direct property investment.’

    The cutting of tax relief enabled those funds to be channelled into fuelling an unsustainable property bubble, which developed becaase of Labours complete lack of regulation of the Banks.

    This was followed by toxic mortgage debt, and this was followed by the bank bailouts.

    This is just one example of Browns incompetent decision making which helped to create the cornerstone of the debt bubble.

    This has also had the effect of pricing younger hardworking people out of housing altogether, so they are in effect working for nothing. No capital.

    Brown has damaged all society. He has made us all much much poorer.

    This, combined with Gordon Brown actively encouraging the Banks to take huge RISKS, were direct causes of the economic disaster, which is the housing boom.

    Gordon Brown
    Speech to the CBI, 5 June 2006:

    “Last year we set out radical proposals for changing the way we regulate: minimising the administrative burdens of regulation; and ensuring that the realities of regulation, as you experience them on the ground, are transformed — by moving away from the ‘old’ blanket approach, of 100 per cent form-filling and 100 per cent inspection that is inefficient and wasteful of your time, to a new approach based on RISK…

    And I believe, too, we should consider how we can continue to extend our RISK-based approach, applying the concept of RISK not just to the enforcement of regulation, but also to the design and indeed to the DECISION ON WHETHER TO REGULATE AT ALL… ”

    Browns entire ideology was to rob the working man blind.

    Make no mistake.
    Labour knew what was happening.
    They let it happen.

    What the UK needed was some stability, instead Labour have given us a rollercoaster ride to hell.

    The UK should not be facing the debt we are facing, and The Labour Party are guily of gross fiscal mismanagement and criminal negligence.

    My hope is that after this GE, or the next election, the UK will punish Labour for their gross incompetence, and that Labour will be relegated to third place in this country.

    The list of Labours incompetence, theft, treachery, lies and deciet goes on and on and on.

    And you can lie to yourself all you want.

    THE HOUSING BOOM SHOULD NEVER HAVE HAPPENED.

    NO FTBERS WILL BE BUYING THEIR FIRST HOUSE UNTIL HOUSE PRICES RETURN TO THEIR 1998 SOLD PRICES.

    YOU HAVE YOUR DEMOGRAPHIC IN THE COMMENTS ABOVE……

  10. To both the FTBers who want the price to drop to 1998 prices.

    I have just bought my first home, i saved and saved and saved. Why? Because it is a hell of a lot cheaper than renting.

    With regards to waiting until house prices drop to 1998 prices. This would never happen. Why would it? That would literally take billions and billions of pounds away from the economy. Who would benefit? FTBers ONLY.

    Correct me if I am wrong, but are there not more people who would lose out that FTBers who would gain?

    Dont get me wrong, I would have loved it if house prices were 1998 prices (before I bought the house), but it was just never going to happen.

    Before we bought our first house, we were paying nearly £1000 pm in rent, now we pay just over £500 in mortgage. You do the math….

  11. sydlawrence
    Beginning of this week you will see the REAL correction begin to take shape.

    You bought too early mate. You fell for the property pro’s waffle.

    Give it a year or two.

    Then go pick up a stunning little villa on a little greek island, with a price tag of about 80% reduction from peak……

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