Jitters for landlords as election giveaways are announced
As polls continue to indicate that neither of the two main parties has pulled ahead in the battle for Number 10, a number of populist property related giveaways were announced over the weekend.
Proposals for controls on residential investment property investments were announced as an appeal to “generation rent” - a sector of society considered by the Labour Party to be vulnerable to unscrupulous private landlords. Reference to poorly maintained properties, above inflation rent rises and the uncertainty of short terms tenancies were used to justify the need for market intervention. However, the reaction has been mixed, with sceptics pointing out the potential for a contraction in the supply of rental properties as investors move their capital to asset classes offering better returns and less uncertainty.
A further warning shot was fired over the bow of landlords this morning following a £225m pledge by the Labour Party that first time buyers purchasing for under £300,000 would be exempt from stamp duty during the first three years of the next parliamentary term. The measure would be funded by a crack down on tax avoidance by landlords, tax penalties for landlords who fail to maintain their properties and an increase in taxes for foreign property investors, although there is little detail on how they would be implemented or policed. Like the proposed mansion tax, the proposals are more likely to appeal to voters outside London.
A more drastic proposal from the Green Party to scrap tax relief on mortgage interest is far less likely to likely to make it on to the statute books, much to the relief of Britain’s 2 million buy-to-let landlords whose investments would be significantly impaired as a consequence.
Whatever unfolds on May 7, for investors in the residential property sector a degree of uncertainty now exists that may be responsible for notable slowdown in activity levels over recent weeks.
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