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By Graham Norwood

Editor, EAT and LAT

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What would a Corbyn government mean for sales and lettings?

While media attention has been on Theresa May, Brexit and the Tories, chatter in the agency industry has been about what Labour might mean for sales and lettings.

What seemed an almost impossible notion three years ago - a hard-left Labour government - is by no means impossible: despite a likely drubbing in the European Elections, Labour’s vote in a first-past-the-post election to Westminster would be much stronger.

Some say this is already affecting the market.

Marc Schneiderman of Arlington Residential agency - who believes a Jeremy Corbyn win could wipe 20 per cent off capital values - says: “At no time during 35 years in property can I remember such unease … We recently sold properties on behalf of two clients because they had concerns about a Corbyn government. Both have chosen to rent and are watching the market carefully.”

A recent poll of voting intentions for a UK Election (taken on May 21 and assuming The Brexit Party fields candidates) shows Labour on 31 per cent and Conservatives on 21; such a result could give Labour a substantial majority, with a mandate for change.

So let’s begin with what we know about its policies affecting the sales market.

Labour housing spokesman John Healey has made broadly sympathetic comments on reform to the house buying process - now under active consideration in the Property Agents Working Group, chaired by cross-bencher Lord Best and working to put flesh on the bones of the Conservatives’ manifesto pledge to make house buying simpler and quicker.

So there’s unlikely to be any significant change to that process, now ongoing.

While there’s been no expressed view on stamp duty, a Corbyn administration would certainly want to be more aggressively redistributive, with property an obvious sector to tax.

Charles Curran, the principal and data analyst at Maskells agency in London, has helpfully produced figures suggesting what a possible annual property tax might raise.

Curran has looked at taxes in Belgium (where owners of a home valued above a certain threshold pay 1.5 to 2.5 per cent of the home’s estimated value in tax each year), and in Germany (1.5 to 2.3 per cent). He says that for a £1m property this could mean £15,000 to £25,000 tax per year for owners: for a £500,000 home it would be £7,500 to £12,500.

Importantly, he adds in relation to his £1m property value example: “It means that mortgage lenders would remove a figure between £1,250 to £2,000 plus per month from their affordably calculations if you are seeking to refinance, trapping many borrowers into a standard variable rate mortgage (post fixed term).”

The devil would of course be in the specific provisions, especially the lower and any possible upper threshold of property value - but this is a valuable example to consider.

Perhaps in tandem with that would be a mansion tax: this was mooted by Ed Miliband for Labour in the 2015 election and even hinted at by David Cameron’s campaign too. The Miliband tax would have been on homes valued at £2m or more - a Corbyn version might well kick in at a significantly lower capital value.

It’s pretty obvious this would be unpopular with our industry and Giles Cook of the Best Gapp agency probably speaks for many when he says of a future Labour administration: “Property wealth will be taxed to the maximum with increased SDLT and a mansion tax, impacting further on overall activity, prices and market confidence.”

Still on the sales market, Labour has hinted that it may seek to control - at least indirectly - house price growth. The tool would be Bank of England limits on mortgage lending.

It’s not just agents who have been critical of this idea: former BoE Monetary Policy Committee member Kate Barker, a housing expert, says this would be ‘absurd’ without the Bank being given a vast range of other powers, which seems unlikely from a new government inclined to keep power in political hands rather than vest it in an institution.

“I’m not sure what device they can impose otherwise on sale values. My instincts are that the mere presence of such an extreme government will send values plummeting and therefore, negative equity, for some, will become more of a problem than rising prices” says Trevor Abrahmsohn of another London agency, Glentree Estates.

One more issue, indirectly affecting sales, is that Labour’s shadow chancellor John McDonnell has suggested he would lower the threshold for inheritance for couples leaving family homes to their children from £800,000 to £425,000.

There may well be very widespread concern amongst the middle classes over that - even if £425,000 is actually twice the price of an average home, so would still hit chiefly the relatively affluent.

Meanwhile Labour has been vocal on its policies towards the private rental sector.

These include in-principle backing for the various measures introduced in recent years by the Conservatives plus some form of rent controls - possibly locally determined and focused on urban areas rather than across the entire country.

There’s well-documented evidence that it has not worked well in Germany where capped rents are widely associated with poorer quality properties that have been starved of investment and improvement by their landlords.

“Rent controls can … inhibit the movement of people due to tenants reluctant to move from a rent-controlled into a market-price property. Housing markets require a gradual and subtle application of regulation rather than the two extremes of low regulation with market forces running rampant, and blunt tools being heavy-handedly applied at short notice” explains Lee Layton, associate director of research at Cushman and Wakefield.

There may be additional licensing and registers too: vague pledges have been made by Labour to add significantly to the red tape for landlords and agents alike.

Labour would be active in other areas too - widespread house building and obstacles for overseas buyers, for example - and these would be popular in much of the country (un-less you lived near a new housing estate, that is).

But for our industry even the possibility of a Corbyn government clearly raises worries, especially in an increasingly populist political climate.

After a decade of Conservative governments producing unwelcome policies for the private rental sector, you would think we might have become immune to political shocks: but it’s just possible that we haven’t seen anything yet...

*Editor of Estate Agent Today and Letting Agent Today, Graham can be found tweeting all things property @PropertyJourn

**This week Graham was named Property Commentator of the Year, Property Trade Magazine Journalist of the Year, Property Columnist of the Year and overall Property Journalist of the Year at the Property Press Awards 2019.

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    Oh f@!k off with your right wing views. For every £1m overpriced house that’s struggling to sell I have 100+ want to be buyers that have saved up all their lives to buy a place and still can’t afford the house they deserve. A house is (read: should be) first and foremost a home, not an investment vehicle. Expecting year on year growth on house prices as well as shares and quarterly profit is exactly the short term thinking that’s led to such an uneven distribution of wealth and the many related issues. What a let down EAT.... you’ve formally shown your true colours and I for one will be unsubscribing and removing all our branches Zoopla memberships. Your are seemingly part of the problem, so don’t write articles claiming otherwise.

    Paul Barrett

    What a load of twaddle you talk.
    Houses have always been investment vehicles.
    All of my homes were something that I considered and hoped would increase in value.
    It was just an investment that I could live in.
    I struggled to achieve the
    Residential property.
    It was always a vehicle to make PROFIT on with a view to pulling out equity and investing in a BTL property.
    It is just tough s### if whiney GR can't afford to buy near mummy and daddy.
    They will have to buy where they can afford which for most of them will be nowhere near mummy and daddy.
    When a country has faced MASS UNCONTROLLED IMMIGRATION for over a decade of millions most of whom want to live in the SE it is no surprise with such demand that property prices have increased as much as they have in the SE.
    Move out of the SE and there are thousands of affordable properties to buy.
    Just snobby GR refuses to accept they can't afford where they wish to reside.
    Welcome to the real world idiot GR.
    You have some very stange views as an EA.
    Perhaps you should work for a Social Housing provider as you seem to bizarrely imagine that residential property is not used to make PROFIT.
    Most homeowners aspire to use residential profits to achieve things.
    Usually to buy a larger property.
    To imagine that homeowners consider their residential property as just a home is for the birds!
    Most of us want profit out of how homes to do with as we wish.
    Of course lots of homeowners are content to leave their profit alone.
    That is their choice.
    Residential borrowing is the cheapest money you can obtain.
    As such this cheap money can be so useful for many things.
    I ALWAYS invested in a residential property or home with a view to making PROFIT and I achieved this objective and utilised it.
    Homes are PROFIT centres.
    It is just unfortunate that many can't afford to invest in a home in an area they prefer...........TOUGH!!!
    Welcome to the real world.
    There are plenty of affordable properties in the UK for sale but perhaps just not in the areas that are affordable.
    Well boo hoo!!
    I'd like to live on Park Lane...............but you know what I can't afford it so live sonewhere that I can afford.
    It is a simple fact that there are too many people in the SE wanting affordable property.
    With inadequate housing supply to meet demand this is purely incompatible with affordable prices.


     
    Simon Shinerock

    Hmm, assuming you aren’t being ironic I suggest you go back to school and do some basic maths, economics and history. In summary, Labour always ruin the economy, communists would destroy it. Second, you can’t strengthen the weak by weakening the strong and finally consider a career move into something more suited to your political beliefs

     
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    There wasn't a single thing 'right wing' about this article.

     
  • jeremy clarke

    Quite simply if corbet came to power this country would be toast, there would be no private enterprise left, no entrepreneurs, the rental and sales market will be decimated. If this is ever allowed to happen it will be regretted for many years in the future - no one should believe the "free unicorns" rubbish that they spout we will all be considerably poorer under a red government.

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    I don't think Ronnie Corbett is likely to come to power, but I would point out we've all become poorer under this government. I say all, but certainly 95% of us.

     
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    Look Labour will not ge getting the keys to No 10.
    Nigel will be kingmaker and the king will be Boris, hopefully with a new crew and New policies. Abolish SD, invest Heavily into NHS, Education, Police, Armed Forces, crack down heavily on Antisocial behaviours (clockwork orange) find an Enoch Powell, stop immigration only for skilled and English speaking persons, who abide by our laws if not bye bye
    Life sentences for chikd abuse, rape, murder, knife crimes make life mean life..

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    Labour support Hamas and they cant add up. They want to send us back to the 70s with their stupid ideas. Corbyn and SHS and SBS are going to be history.

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    Same here always but always purchased my house that i want to live in with the view how much profit will i make when I come to sell. Owned and lived in 19 properties each time on sale made a profit or i would not sell, simple rule.puchased first property in 1972 and last one 4 years ago, already into 100k profit on this last home at least, but happy to stay put at the moment. Must look at your own living in property with a profit in mine.

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    Corbyns future, certainly not mine. Overall I'm pleased that someone has the insight to publish this article.

  • Agent  Landlord

    What price a Corbyn government by Xmas? Here's how it plays out: the popular choice for Conservative leadership is Johnson, and he's elected after a scramble for the position but is acknowledged as the only populist politician capable of rebuilding the Tory brand with the electorate (c.f. beating Corbyn); problem is, c. 20 Conservative MP's resign the whip as they simply won't work with Johnson; Boris can't run such a minority Government, so has to go to the country; do the electorate trust the Conservatives any more after the Maybot fiasco - probably not enough to stave off a hung parliament and certainly they'll be punished anyway after all the Brexit problems, even though they don't trust Magic Grandpa Corbyn enough to give him a majority...but he doesn't need one - a simple alliance with Sturgeon's SNP get's him home.
    So, straight after the Conference season we'll have a Marxist government in the UK (with Scotland soon not part of it as Sturgeon's price is obviously extraction via another referendum).
    All of this unless Boris is unbelievably good at reconciling his detractors by pointing out the nuclear option that otherwise exists, and hoping that Conservatives look out more for their own skins than for their supposed beliefs.
    Nightmare scenario and all too possible.

  • Paul Barrett

    I am c######g myself that I won't be out of the AST PRS by the time of the next GE.
    No way do I wish to be a LL with the risk of Corbyn and his fellow Marxists in power.
    Labour has already stated it intends to tax LL wealth until the pips squeak.
    Anyone remember Healey stating the same thing back in the 70's.
    That caused the rich to leave and the PRS to massively decline.
    In fact the nuclear option could well be introduction of CGT on PPR.
    It is those in the SE that Labour will be coming for as that is where most of the wealth is.
    What do EA think would be the effects on the market of CGT on PPR?

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    We will be safe, nobody with a normal brain will vote this joker of a clown and his brain dead clones into any sort of power position.
    They not only support Hamas but cant add up, come on folks we will not see labour this decade in a seat of power,,, i pray.

  • Paul Barrett

    Steve mate,
    I just can't take the risk.
    I am at a time of life where I have no real time remaining to recover from a Labour Govt once they have done their worst in a 5 year term.
    I'm not religious so praying won't do it for me!
    What is that they say about Failing to plan is planning to fail!!!
    So I need to get out of the AST PRS and hope to Christ the looney Corbyn or his successors don't introduce CGT on PPR.
    The temptation to do so would be massive.
    After all would all those tenant and homeowner votes go elsewhere just because homeowners are taxed more!?
    Can't see any non-homeowner being the slightest bit concerned.
    Many of them may aspire to be homeowners but few can afford where they want to be.
    Hitting the property owning classes in general is a very attractive proposition as far as a Marxist is concerned.
    After all ALL property is theft!!!!
    Mansion taxes etc etc; anything to make property owners as poor as tenants.
    Not as though it would be electorally damaging.
    Few Labour voters own property.
    The votes are where tenants are.
    Property owners should be fully cognisant of the damage a Labour Govt can do to their property wealth.
    Mind you there isn't much you can do about it as property tends not to move around much.
    I consider those that have sold up and are currently renting and watching and waiting are being very shrewd.
    The rest of are stuck like a stuck pig waiting to be slaughtered by the Marxists.
    I should imagine the banks are a bit nervous as well.
    The effects on their mortgage loan book values could be very detrimental and then we are in CC territory.
    Brexit is simply not a problem.
    Corbyn on the other hand just doesn't bear thinking about!!!!
    I don't believe the UK has ever faced the prospect of such a radical Govt.
    Property rights have been considered as fairly sacrosanct since the war by all Govts.
    Well Corbyn won't have any qualms about going for the property owning classes.
    You couldn't blame him....................it is after all where the money is especially in the SE.
    Not many vote Labour in the SE so he hasn't much to lose by stripping wealth from the SE property owning classes.

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