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London Property Market 22 April 2015

Property Promises

Although all of the main parties have now released their party manifestos, it is very likely that none of them will get a clear majority at the General Election on 7 May, so there is limited value in looking at their policies in isolation. Instead, let's consider where the areas of common ground lie and what the insurmountable differences will be. Anything in the party manifestos will be "up for grabs" when the post-election horse-trading kicks in, that's why we at Chestertons have come up with an at-a-glance guide to help get a handle on the possible outcomes.

Wealth taxes

Taxation on wealth and high-earners is a key proposal in many of the manifestos, with all parties bar the Tories or UKIP proposing some form of Mansion Tax on higher value properties. Few details have emerged as to how it would operate in practice, and there's general disagreement on how much it would raise, but it's fair to assume that such a tax would not only affect the super-rich, but also many less wealthy households, the vast majority of which would be in London. Those expected to get dragged into the taxable bracket could include buyers who bought when prices were low but have since seen the value of their home rise. This means many older people who have lived in the same house for a long time may find themselves forced to downsize to avoid being penalised.

While it is debatable how much such a tax would generate, unless the Tories can form a Government after the election, then people should expect some kind of Mansion Tax proposal to be on the table.

The parties are more closely aligned when it comes to reforming Inheritance Tax, with the Tories proposing raising the allowance and Labour and the Greens backing a review of thresholds. UKIP would push for it to be scrapped altogether.

Council Tax

Although it has barely been touched in over 20 years, none of the parties has committed to major reform of Council Tax, almost certainly because of the time and cost involved in revaluing all homes in the UK. The Tories don't propose anything much other than keeping it as low as possible, and would probably seek to extend their nationwide freeze if they form the next Government. All the other parties are in agreement that relief should be abolished and additional levies imposed on empty properties or second homes, while the Greens ultimately favour replacing the tax and Business Rates with a new Land Value Tax.

While all parties agree that both Council Tax and Business Rates are in need of reform, the cost of wide-scale revaluations and a general commitment to any changes remaining fiscally neutral – i.e. not hitting the public purse – mean it's unlikely we will see much more than mere tinkering at the edges, whatever the composition of the next Government.


With cross-party consensus that tax evasion and avoidance must be cracked down on, there is likely to be reform of the UK's unusual arrangements under which people can live in Britain, but avoid being "domiciled" here for tax purposes. Labour claims it will abolish the status, unique among major developed economies, though there will be some exemptions. The Lib Dems and Tories also agree that the various bands and charges should be reviewed. The system is therefore almost certain to change regardless of who's in power after 7 May.

The Private Rented Sector (PRS)

Again, there is consensus that reforms in the private rented sector are needed, but the parties differ wildly in their preferred methods. Labour and the Greens favour a very hands-on approach, with landlord registration schemes, longer standardised tenancies and rent control policies being introduced to prevent prices rising out of reach of average people. The Tories, as is traditional, prefer not to meddle in free-market economics. Ultimately, with ever-increasing numbers of people unable to buy, the problem is that there just aren't enough properties in the right places to satisfy rising demand.

While none of the parties is proposing anything that is likely to introduce significant numbers of new properties into the market, the risk remains that over-regulation of landlords could actually reduce the number of properties to rent, or that increased costs and red-tape could ultimately be passed on to the very tenants they are designed to protect. The aim of a fairer, more transparent and accessible private rented sector is laudable, but the risks of such unintended consequences may outweigh the benefits both to landlords and their tenants.

First-time buyers

All parties seem keen to woo first-time buyers, but there is general disagreement on how they should be helped.

The Tories' Help to Buy scheme and proposed Help to Buy ISAs are a step in the right direction but the proposed solutions only really address issues of demand without incentivising supply. Labour and the Lib-Dems would alter or divert funds from the Tories' Help to Buy schemes more directly into house-building, while UKIP would insist only UK nationals should benefit. Meanwhile, the Tories' extension of Right to Buy to Housing Association tenants would also resisted by most of the other parties, who argue this would lead to a reduction in social housing.

Initiatives to support first-time buyers are generally to be applauded, as surveys indicate most people in Britain still aspire to home ownership. However, as long as demand outstrips supply, prices will remain beyond the financial means of many. Despite the favourable mortgage environment, putting together the required deposit is often the main obstacle for would-be first-time buyers.

Tackling the housing shortage

Most parties agree more new homes are needed, with the Greens favouring refurbishment, repair and improvement over building new houses, but how any new Government could actually deliver on the pre-election promises remains to be seen. All favour brownfield sites (land that has already been developed, such as former industrial land) over green-belt development and, while the ideas of Garden Cities or New Towns are popular in principle, in practice local opposition to wide-scale development is the real stumbling block.

Among the more radical policies are Labour's "use it or lose it" use of Compulsory Purchase Orders (CPOs) to reclaim land from developers who gain planning consent but delay construction. The Lib-Dems would also allow local authorities to bring more development land forward. UKIP remains diametrically opposed, and suggests local people should be able to block planning applications in a referendum. It's hard to see how the numbers of new homes being talked about – ranging from 100,000 extra affordable homes per year (Tories) to 300,000 (Lib-Dems) can ever be achieved without a much more ruthless and centralised approach to planning reform.

As a nation we are also not building enough of the right type of homes, with too many houses and not enough flats. The proportion of flats being built has fallen from a peak of 46% in 2008-9 to just 26% in last year. "Empty nesters" who want to downsize to release capital and live in more affordable, efficient homes are often unable to do so owing to a shortage of the right type of property. This can lead to people being "locked in" to bigger homes more appropriate for larger families and, somewhat ironically, at risk of qualifying for any new Mansion Tax.