Labour’s election landslide and the UK property market: what we might expect

With a majority of 166, the Labour Party has just won the July 2024 General Election, marking the end of 14 years of Conservative rule.

Described by the BBC as a ‘historic Tory defeat’, the Labour success in the UK election has sent ripples through the property market. The seismic change in political landscape has already been met with a wave of reactions from the industry, with many viewing it as a fresh start to rejuvenate the sector.

Although too early to tell with the change of Government, experts are closely monitoring the potential impact on infrastructure investment, housing development, and conveyancing.

So, what might this new regime mean for the property sector?

1. Labour’s Manifesto and Property Initiatives

In its manifesto, Labour made it clear that supporting the property market would be a priority. Key pledges included ambitious housebuilding targets and investment commitments. Labour have promised 1.5m new homes over the next parliament, and it will be interesting to see if this manifesto pledge is delivered.

The Party has also made a commitment to create a number of new towns that would invigorate building at scale and is planned to ensure much needed accompanying infrastructure in the form of schools, GP surgeries and transport links.

Through the taxation of foreign buyers, Labour plans to fund the training and recruitment of 300 additional planning officers to fix what the Party believes to be a broken planning law system.

2. Stability Amidst Uncertainty

Unlike previous elections, commentators have indicated that the July 2024 election had less uncertainty as to the outcome. The early election call by Rishi Sunak and the widely expected Labour victory appeared to have supressed market nervousness. As results came through overnight, the market position seemed to have been confirmed and pundits anticipate a post-election uptick in property market activity.

3. Signs of Optimism

Several factors hint at positive developments:

• Increased Listings: The number of homes coming onto the market in the first half of 2024 is 22.9% higher than last year.
• Potential Rate Cuts: Economists predict the Bank of England will cut the base rate twice by year-end.
• Lender Support: Lenders must focus proactively on flexibility and optionality to navigate the new political and economic landscape.
• Labour plan to introduce a new Freedom to Buy scheme to replace the Mortgage Guarantee Scheme.

4. Challenges Ahead

Notwithstanding their success, the new Government faces challenges:

• Interest Rates: High interest rates persist.
• Cost of Living Crisis: People’s spending power is still adversely affected.
• Economic Growth: A key metric to any successful jurisdiction.
• Labour have not ruled out increasing Capital Gains Tax, in a potential further deterrent for landlords. However, it has been suggested that Capital Gains Tax will not apply to primary residences.

5. Rebuilding and Attracting Investment

The Labour Party is of the view that the UK now has an opportunity to reposition itself globally.

This may be through the following steps:

• Reform Planning: By streamlining the planning system through increased resourcing and swifter decision making.
• Scale Up Housing Delivery: Transposing election promises on housebuilding into reality.
• Green Infrastructure: Attracting global investments for sustainable projects.

6. Regional Trends

The prime property market is awakening:

• Scotland: Annual growth of 10.3%.
• East Midlands: Positive growth at 1.2%.

Conclusion

With any new Government, there are manifesto pledges that now need to be delivered to satisfy the electorate.  These positive commitments also come with challenges.

The rumoured interest rate cut from the Bank of England (hopefully becoming a reality in August 2024) would help trigger increased confidence in the housing sector. Many industry experts are viewing the change in government as an opportunity to ‘get Britain building again’.

As the property sector adapts, we will be following with interest how policies unfold, and not least concerning the recent Leasehold and Freehold Reform Act, the subject of a recent note by our UK Real Estate team.

For now, the market remains cautiously optimistic.

If you need any further information or legal advice, including conveyancing of a property in England, please contact our designated UKRE team led by Anna Douglass, Alastair Hargreaves, Caren Vidamour, Naledi Odiseng who will be delighted to assist.