Has the snap General Election affected the buy-to-let market?
- Published: Thursday 20 April, 2017
- Category: Economy
- By: Matthew Bone
- Updated: Friday 21 April, 2017
With the shock snap election announcement made by the Prime Minister this week, we look at the potential effect the political upheaval may have on the buy-to-let sector over the coming weeks and share the views of our chief executive Andrew Turner.
For many landlords across the country, the last 18 months have been turbulent at best. The government has systematically turned a vital part of the UK’s housing sector into a political punch bag, through a myriad of much-maligned legislation, hard-hitting tax changes and constant landlord bashing.
Immediate announcement aftermath
Some commentators anticipate that there will be a slowdown in the housing market between now and election day on 8th June, due to the uncertainty the announcement has caused. Our chief executive, Andrew Turner, is in agreement and shares his perspective on Mrs May’s news:
“This announcement has created a great deal of uncertainty in the market. Just as the sector, and the economy as a whole, was settling down to a Brexit Britain, the announcement of the election has thrown everything back into turmoil, yet again.
While the pound hit a 6-month high, which increased spending power in the markets, the FTSE 100 had £46 billion wiped off it, which affects big businesses at the heart of the economy, some of which are operating in the housing market.
Even upon the election results, the ripples caused by the political upheaval could be felt for several months afterwards which is disappointing for those of us who strongly believe in the value of the private rental sector.”
What will this mean for landlords?
While there will be no immediate significant changes in the sector as a whole, there could be some potential knock-on effects, highlighted below.
As mentioned above, the buy-to-let market had begun to level off from its legislation-induced decline and was showing signs of stabilising. However, any potential growth inspired by this has again been disrupted by yet another injection of uncertainty derived from an unknown path ahead. The extent to which landlords feel the outcome of the election will impact on their investment strategy is an unknown.
Some investors may hold off from making any purchases or sales decision until after the election results are in and there is a clearer picture as to who and how the country will be run. However, that said, with only a short period until Election Day, there is not that long to wait.
Potential change of Housing Minister
The revolving door of Housing Ministers may continue in this election. Since 1997, there have been 14 Housing Ministers under five Prime Ministers, over the 20-year period, which equates to one every 17 months on average.
The current incumbent, Gavin Barwell, has only been in office for nine months and has a very small majority in his constituency of Croydon Central, with just 0.3% (165 seats). Should Barwell not be re-elected, he will be unable to remain as Housing Minister.
However, under a Tory government, this is unlikely to impact the sector greatly as a whole, with Communities Secretary Sajid Javid, who oversaw the creation of the 2017 Housing White Paper, saying this week that the paper will be a “central part” of the next conservative government’s housing policy.
But what of the other parties? Labour’s shadow housing secretary called it “feeble beyond belief”; the leader of the Liberal Democrats, Tim Farron said of it “This is an unambitious and disappointing paper”; Jonathan Bartley, co-leader of the green party commented that it’s policies were “a slap in the face”.
Side stepping the inevitable mudslinging, there did not appear to be any fundamental rejection of the objectives of the paper, just derision as to the lack-lustre plans to achieve them. When it comes to voting to protect ones interests as a landlord, you must weigh up the pros and cons of each party’s plans to tackle this issue, amidst the other factors at play.
Letting agent fee ban consultation
On the 7th April, the government announced it had opened a consultation on the proposed banning of letting agents fees for tenants, which is set to run until 2nd June. The government has confirmed that despite the election announcement and subsequent campaigning by MP’s, the consultation would remain open.
With the consultation continuing to run during the campaigning, there does not appear to be any reason why it should not go ahead once the election has been decided. Although a Conservative proposal, Labour have already agreed with the ban, and intend to implement it, should they be elected.
Only time will tell
Although the election go-ahead vote was unanimously passed by the House of Commons, and the political parties are now gearing up for campaigning, it is too early in the election process for any definitive party lines to be seen.
With homelessness rising and the void between salaries and house prices growing, housing will be a top priority across all party manifestos and there is likely to be much debate around the subject over the coming weeks.
The general election is less than two months away, when landlords will have the opportunity to make their voices heard through the ballot box.
Andrew Turner believes that regardless of which political party is in power after 8th June, property will prevail as a sound investment option:
“Irrespective of who is in power once the election results are in, I do not foresee significant change in property as an investment opportunity. The Conservatives have narrowed the margin of profitability within buy-to-let, and the increasing work necessary to administrate a buy-to-let property makes it an undertaking not to be taken lightly but, against alternative avenues for investment, property continues to look an attractive option.
Landlords are astute business people, who will identify strategies to make their investment work as they have done for many years.
The role of lenders in this equation is to assist those investing in property with flexible solutions that understand and address the needs of landlords, and for our part, we remain the conduit between the two, matching a landlords circumstances and needs to an appropriate financial solution which will set them up for success.”
To keep up to date with the latest industry specific news and to receive the weekly landlord newsletter from Andrew Turner, please click here.
This information should not be interpreted as financial advice. Mortgage and loan rates are subject to change.