Labour is planning a raft of policies that will send ripples through the housing market, affecting first-time buyers, homeowners and landlords. We look at what’s planned and what homeowners can do to protect themselves and benefit from the changes.
First time buyers who are hesitant may pay more stamp duty. Buyers on the first rung of the property ladder currently enjoy a temporary stamp duty exemption, meaning they don’t have to pay tax on the purchase of a property up to £425,000.
This threshold was raised in September 2022 and will remain in place until the end of March next year. However, a Labour Party spokesman said last month that the relief would not be extended, meaning the threshold will revert to £300,000.
The average price paid by first-time UK buyers last year was £288,136, according to comparison website Finder. However, buyers in many areas would struggle to find homes below the £300,000 mark.
Outlook: First-time homebuyers who are hesitant may pay more transfer tax.
Last year, buyers bought a home in the capital for the first time, with an average value of £492,234.
People looking to buy a home in the east and south-east of England are also likely to cross the Labour border and pay stamp duty.
First-time homebuyers who are able to buy a home for the first time may want to get their purchase underway before the stamp duty cut leaves them with a tax bill. Jamie Lennox, an agent at Dimora mortgages, says: ‘You need to buy sooner rather than later.’
Landlords risk high capital gains tax
Capital gains tax: It is rumoured that Labour could increase the amount of tax investors pay – either by further reducing capital gains tax exemptions or by increasing rates
Investors must pay capital gains tax when they sell or dispose of an asset. They all have a tax-free allowance of £3,000, down from £12,300 just two years ago.
Rates vary depending on your income and the type of assets you are selling.
Changes to capital gains tax have not yet been confirmed, but there are rumours that Labour could increase the amount of tax investors pay – either by further reducing capital gains tax exemptions or by increasing rates.
Justin Moy of estate agents Essex Home Finance said: ‘Landlords are eagerly awaiting clarity on tax policy.
“We could see significant numbers of transactions in the coming months before any potential tax increases kick in. This could push prices up and even increase inflation a bit. Tax rates would then remain at roughly current levels.”
Lennox advises landlords to seek tax advice now to discuss their options.
Commit yourself to a mortgage agreement
Brokers’ attitudes towards mortgage rates remain generally positive after the election, says an industry expert
The country is still coming to terms with the news of Labour’s landslide victory, but experts say the outcome was anticipated some time ago and already factored into mortgage rates.
Ben Perks of Orchard Financial Advisers said: ‘A Labour victory was priced in months ago, so Friday’s election result shouldn’t rock the boat too much. I expect mortgage rates to continue to fall.’
Perks argues that rate cuts are in fact far more likely to be triggered by a cut in the Bank of England’s base rate than by a Labour victory. Interest rates were held at 5.25 percent last month and financial markets are now expecting a cut in August. Five of Britain’s biggest lenders cut interest rates last week, including Barclays, HSBC and Santander.
David Hollingworth of estate agency L&C says brokers’ attitudes to mortgage rates remain generally positive following the election.
Homeowners who need to refinance their mortgage in the coming months may want to consider getting a new fixed rate now for when their current mortgage expires. However, if rates continue to fall in the meantime, they may reject this deal and look for an even better one.
Get ready for a house price increase
Impact of housing construction: a large influx into the housing stock could push prices down in some areas
Labour has proposed a number of policy measures that could impact house prices.
First, the country has pledged to build 1.5 million new homes over the next five years.
That means building 300,000 homes every year – more than double the number built in 2022-23. Labour says it will do this by reducing planning application delays, helping first-time buyers and building on “ugly” green belt land.
If successful, the large influx of new homes could push prices down in some areas, Lennox says.
If there is a large exit of landlords from the sector due to changes that make their investments less profitable, this could also lead to lower house prices.
On the other hand, people who have postponed moving or purchasing a new home due to political uncertainty may be able to take action in the coming months.
“If the election leads to an increase in consumer confidence, this could be reflected in a gradual improvement in house prices and market activity levels,” Hollingworth said.
‘Assuming the Bank of England can cut rates, as widely expected, borrowers should become more optimistic and those who have been putting off action may return to the market.’
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