Today, either Boris Johnson or Jeremy Hunt will replace Theresa May as Britain’s Prime Minister, with barely three months to go until Brexit.
The appointed PM will have a huge impact on the outcome of Brexit, as well as the housing market, the fate of Briton’s landlords, and the PRS.
Though it’s essentially a game of wait and see, here’s Portico’s forecast for how Boris Johnson and Jeremey Hunt’s five key policies and views could affect the property market.
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- Jeremy Hunt plans to “gift” land to 1.5 million young people through ‘Right To Own’ scheme, to revive the home-buying revolution
The Tory leadership contender has said that he hopes to help those struggling to save a deposit or afford a mortgage by giving less well-off, first-time buyers a free plot of land.
Jeremy Hunt plans to give 1.5 million young people a “gift” of land, in a bid to revive the home-buying revolution. He has stated that he believes his scheme, named “Right To Own”, could win Conservative support from the younger generation, and likened his ambitious idea to one of Thatchers’:
“Margaret Thatcher got 1.5 million council tenants onto the housing ladder through her right-to-buy scheme….” “I have an equally ambitious scheme called Right To Own which will help 1.5 million young people get on the housing ladder, people who can’t afford a mortgage or a deposit.”
The Evening Standard reported that “The aim of Hunt’s scheme is to target the windfall profits usually made by a property developer when they get planning permission for building homes, which can boost the value of a site by up to 10 times. Under Mr Hunt’s scheme, councils and Homes England would be encouraged to own land and get planning permission themselves.”
The paper explained that after the sites increase in value, a portion would be sold at top price to cover the costs of the scheme, with the land left over used for starter homes sold at affordable prices to young people, or sold profitably to raise funds for help with deposits.
- Boris Johnson states he’s committed to building more affordable homes – and has hinted at the extension of Right To Buy
Housing Today noted that Johnson’s history as London mayor suggests that he likes to prioritise an increase in overall housing supply over provision of subsidised properties for low income earners, but, so far, there’s not been much detail on how he plans to do so.
- Boris Johnson also plans to reduce “absurdly high” stamp duty, which could help first-time buyers get on the ladder and invigorate the prime London market
Boris Johnson has made a bold promise to abandon all levies on properties valued at under £500,000. The hopeful PM also intends to lower the top rate of stamp duty tax on the most expensive properties (valued over £1.5m) from 12% to 7%.
So, what would Boris Johnson’s stamp duty plans mean for you?
First time buyers and home movers purchasing property under £500,000
Currently, first-time buyers in England or Northern Ireland are only free of Stamp Duty tax on properties valued at £300,000 or less. For first-time purchases worth between £300,000 and £500,000, no stamp duty is paid on the first £300,000, meaning a reduced rate is paid.
Home movers planning on buying property under the half a million-pound mark would also benefit from Boris’ stamp duty reforms. While George Osborne’s changes in 2014 lowered stamp duty for this group, this change would make them exempt from stamp duty altogether.
The top end of the property market could get a boost – and prime London property prices may increase
When George Osborne hiked up stamp duty for homes valued at £925,000 or more in 2014, the top end of the market (particularly prime central London) came to a standstill.
Portico reported on this “standstill” back in 2016, stating that transaction volumes, or the number of homes being bought and sold in the capital, were “critically low”:
“Transaction volume levels … are down 60% in prime central London against last year. With price historically following volume decline, we have now seen the first monthly year on year price decrease of 1.1% in the City of Westminster (September 2015 to September 2016) since the 2008 recession.”
A large part of this drop was explained by a big bounce in sales in the run-up to April this year, when a change to property taxes introduced by ex-chancellor George Osborne came into effect.
What about Landlords?
Boris Johnsons’ stamp duty reform could also include the 3% levy attached to the purchase of second properties, which could have a huge impact on the PRS – though this was not actually mentioned in the report.
However, if the ‘landlord second home tax’ was dropped, research suggests that just 10% of properties bought last year would have been liable for stamp duty – so the majority of landlords would be considerably better off.
Similarly, Hunt plans to cut corporation tax from 19% to 12.5%, which could also have a big effect on the landlords who have decided to incorporate to avoid the changes to the Mortgage Interest Tax Relief.
As a company, you pay corporation tax rather than income tax on the profit you’re left with after deducting all mortgage interest. The rate of corporation tax is currently set at 18%, but if that declines to 12.5% as Hunt states, incorporated landlords will have much more cash left at the end of their tax return.
- Hunt describes High Speed 2 as “absolutely vital”, Boris has doubts about its future
Boris Johnson’s Uxbridge and South Ruislip constituency will be affected by HS2, so it’s no real surprise that the hopeful PM is not an advocate of the high-speed rail line.
Johnson stated that HS2, which will link London, the Midlands and the north of England, will cause “a great deal of difficulties” for the local people. He also spoke of his “anxieties” about the business case and he said he would have a review of the project if elected PM.
Contrary to Johnson’s beliefs, it’s widely thought that HS2 could be key to regional regeneration in the north and Midlands, and anticipation for the rail link is already increasing investment and property prices within the affected areas.
In opposition to Johnson, Hunt described HS2 as ”absolutely vital” and said it’s a vehicle to “spread prosperity to the whole country”. Hunt also claimed he supports and is in favour of the Northern Powerhouse Rail, (NPR) previously called High Speed 3 (HS3) or Crossrail for the North.
- Boris has “grave reservations” about Heathrow’s Expansion, Hunt is backing it
Boris Johnson once vowed to lie down in front of bulldozers to stop Heathrow Airport’s expansion, and though not as passionate, his feelings towards the expansion remain grave. Johnson recently said he’d review the project if we were to be made prime minister.
The Independent recently reported that cancelling plans for a third runway at Heathrow airport could cost the UK economy more than 300,000 jobs, though on the other hand, expanding the Airport could also have a negative effect on local property prices.
In fact, since June last year when the proposed expansion was approved, local house prices in affected areas have fallen -2.6% on average.
Hunt, on the other hand, said a third runway would help spread wealth around the country and is clear he is backing the £14bn expansion.