Introduction
With the Labour Party regaining power for the first time since 2010, the UK property market is again under the microscope. Investors are curious about how the new policies will impact house prices, particularly given the party's history with housing reforms. This article delves into the potential effects of Labour's policies on the UK property market, based on historical trends from previous Labour governments, and outlines key opportunities for property investors.
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House Price Overview
Despite some market uncertainty leading up to the 2024 general election, UK house prices remained relatively stable, with only a slight drop of 0.4% in Q2. However, by September 2024, house prices had risen at their fastest rate in almost two years (0.7%). Overall, prices are expected to increase by 1.5% by the end of 2024, with stronger growth predicted in North England than in the South. However, forecasts suggest house prices may fall by 3% before recovering with a 3.5% increase in 2025.
Historic Labour Tenures and Housing Markets
1964-1979
During Labour's governance from 1964 to 1979, house prices saw stable growth, particularly in the 1960s, with an average annual house price increase of 3%. This period saw the construction of over 350,000 homes annually. However, the oil crisis in 1973 led to a market correction, with house prices dropping by 30% in real terms during the recession.
1997-2010
Labour’s tenure from 1997 to 2010 brought another significant period of house price growth, doubling house prices between 2000 and 2004 due to low interest rates and easy access to credit. The 2008 financial crisis led to a 20% drop in house prices, but despite this, average property values grew from £61,946 to £170,846 under Labour's governance.
Labour’s Housing Policies Today
Labour’s new policies aim to address housing supply issues and improve affordability, with plans to build 1.5 million homes within five years. Key policies include:
a. New Towns & Urban Development: Plans to create new towns with green spaces and transport links.
b. Fast-Track Planning: Introduction of a ‘planning passport’ for urban brownfield development.
c. Support for First-Time Buyers: Government-backed mortgage schemes to assist young buyers.
d. Affordable Housing Supply: Increase in the construction of council houses and affordable homes, tackling the shortage that has driven up prices and rents.
While ambitious, the success of these policies will depend on economic conditions and their implementation. Labour's pledge to build at least 300,000 homes annually will be crucial to curbing the ongoing housing crisis.
Protection for Renters & First-Time Buyers
Labour plans to abolish Section 21 to protect renters and improve rental property standards. For first-time buyers, the mortgage guarantee scheme will reduce deposit requirements, making homeownership more accessible. These policies are designed to tackle affordability issues while ensuring high standards in rental accommodation.
Stamp Duty Changes
From March 2025, Labour will make several changes to the UK's stamp duty system. The nil-rate threshold will revert to £125,000, and the first-time buyer threshold will drop to £300,000. Additionally, non-UK residents will face a 3% surcharge, aimed at reducing speculative investments.
Conclusion
Labour's policies aim to stabilise house prices and increase affordability, with a strong focus on boosting housing supply. However, historical data shows house prices have risen more under Labour than under Conservative governments, with an average growth of 3%. The next few years will reveal whether Labour can deliver on its ambitious housing targets.