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How Will the Labour Victory Impact the Property Market?

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    How Will the Next Government Approach Housing?

    The past few years have been interesting for the property investment sector, but the market has shown surprising resilience. Many forecasters believe that the market is well on its way to recovery thanks to a strong start at the beginning of 2024.

    However, those in the property sector have also faced significant challenges, and solving these issues now falls on the shoulders of the Labour Party.

    Many property experts have suggested the housing market will react well to this news.

    Richard Donnell, executive director of research at Zoopla, speaking on 4th July before the results had been announced, said: “There will be a base rate cut at some point which will do more for market confidence than the election itself, and if this came in quick succession, it could support sentiment and sales volumes which are on track for a 10% uplift in 2024.

    “In terms of housing policies, the growth agenda is positive but it actually needs delivering. The housing market is an extension of the economy, so a growing economy and wealth creation is ultimately good for homeowners.”

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    Labour victory impact on the property market

    What Issues Will the New Government Face in the Housing Sector?

    One of the significant issues facing the property sector is a lack of housing stock. This supply-demand imbalance has been driving up rents at an unsustainable rate, and rents outside of London have soared by 7% annually. Property experts have been calling on the government to prioritise the rental sector in the coming year.

    According to Rightmove, the average advertised rent outside of London hit a record high of £1316 per calendar month in May, leading the property portal to call on the new government to “accelerate housebuilding and incentivise landlords to invest in more homes for tenants.”

    Another issue that has affected property investors is the planning system. Critics of the current system highlight the difficulty some developers have getting permission to build new homes and commercial buildings. According to the House Builders Federation, the number of planning permissions granted for new homes continues to decline and is predicted to fall to record-low levels in the coming years.

    One issue is that large parts of the country have explicit bans on new construction; green belt land is one example. Secondly, decisions on new developments are highly discretionary, and this uncertainty can discourage smaller businesses from entering the market due to additional costs incurred.

    Developers and property experts have campaigned for the government to create a smoother planning process to enable faster and more efficient delivery of new homes.

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      What is Labour’s Approach to Planning and New Housing?

      According to their manifesto, published in the run-up to the election, Labour has pledged to deliver 1.5 million new homes throughout its run in parliament.

      The party say they will achieve this by:

      • Reinstating mandatory housing targets
      • Strengthening presumptions in favour of sustainable development
      • Funding additional planning officers
      • Reforming the planning system

      Labour’s manifesto states that they are keeping a brownfield-first approach whilst also taking on a more strategic approach to greenbelt land designation and prioritising the release of ‘grey belt’ land. The grey belt is a new class of land consisting of green belt areas designated as low quality. They have ruled out building on ‘genuine nature spots’, and developers should include improvements to existing green spaces in their plans. Labour has also put forward the idea of a ‘planning passport’ for urban brownfield development, giving fast-track approval for developments on these sites.

      Before election day, Rightmove spoke to Labour Housing Minister Matthew Pennycook to ask about the party’s plans for the housing market in case of victory.

      According to him, Labour is committed to changing the currently convoluted planning system as soon as possible. He said: “Our immediate focus would be to reform the planning system, starting with updating the National Planning Policy Framework.

      “Other measures include finally getting serious about boosting Local Plan coverage, building a series of large-scale new communities, including a new generation of new towns; further reforming outdated compulsory purchase compensation rules that inflate the cost of land to the benefit of speculators, reintroducing cross-boundary strategic planning, and adopting a strategic approach to greenbelt land designation and release to build more homes in the right places.

      “We are confident that the targeted series of interventions we have outlined will enable us to ramp up supply, tackle the housing crisis and boost economic growth.”

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      What is Labour’s Approach to the Rental Sector?

      Labour has made it clear that it wants to retain private landlords in the rental sector and acknowledges that tax changes and rising interest rates have made the sector less attractive to some investors in the past.

      Pennycook said: “There is some evidence to suggest that a proportion of smaller landlords have exited the sector since 2018 – largely as a result of tax changes introduced by George Osborne and rising interest rates in the wake of Liz Truss’ disastrous mini-budget – but no robust evidence for a mass exodus as some have purported.

      For a more in-depth look into the current UK property climate, take a look at some of our recent investment insights:

      “Good landlords have nothing to fear from Labour’s plan to overhaul the regulation of the private rented sector. We value the contribution that good landlords make, and we will, of course, consult with them every step of the way about our legislative intentions.”

      How Will the Labour Victory Impact the Property Market?

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      Jessica Ferris

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      Jessica Ferris is a property writer at RWinvest, helping our readers stay ahead of property market trends with the latest news and statistics.