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In The Press – ‘Can Labour be good for the specialist finance market?’

Updated: Jul 2

The team at Saxon Trust has been very busy with completions in recent weeks which, thankfully, has left little time to watch the General Election campaign coverage! We’ve left this to our head of sales and marketing, Brian West, who has written the following article for June's 'The Intermediary' magazine:





General Elections traditionally introduce a large dose of uncertainty into the property market. This in turn leads to delayed decisions and transactions as buyers, sellers and lenders become more risk averse whilst they await greater clarity on the post-election landscape.

 

Having said this the impending 4th July vote is perhaps a little different from recent elections in that Labour, despite a dire result in 2019, are widely expected to win and win big.

 

With Sir Keir Starmer studiously avoiding the Theresa May trap of basing the campaign around his personality, it seems likely that his party will gain a significant majority such is the unpopularity of the Conservatives. Indeed, the latest talk is of a “super-majority” which for some reason seems to have replaced “landslide victory” in this year’s election terminology?

 

In theory this expectation should reduce pre-election uncertainty and improve sentiment in the specialist finance market but if the focus moves away from who will win, it falls instead on what Labour will do in power?

 

History certainly gives cause for optimism here. In 1997, the last time Labour came to power after a lengthy spell in opposition, they had a very positive impact on the property market. They did this by providing a stable economic environment, supportive policies for homeownership, investment in regeneration projects and tax reliefs for buy-to-let investors that helped to galvanise the private rental sector.

 

Together these measures contributed to a booming property market but of course there is one key difference between 1997 and 2024. In 1997 Labour inherited an economy which was in considerably better shape than we have today, one where the public debt was reducing and a fraction of the eye-watering numbers we see today. Ultimately a lack of funds to invest could dilute Labour plans if they form the new government on the 5th July.

 

Exciting opportunities nonetheless...

Whilst this article is being written before Labour’s manifesto is released, it seems that if they form the next government, they will look to promote investment in housing and public infrastructure projects, particularly in targeted regions. This could certainly boost both the residential and commercial property sectors, particularly if accompanied by an improved and reformed Help to Buy scheme for first-time buyers and other pro-active measures.

 

Labour plans to build at least 150,000 council and social homes each year for 5 years should increase demand for specialist finance products, particularly those tailored to large scale construction projects. Policies promoting green retrofitting and energy efficiency should also lead to potential new product niches for the specialist finance industry.

 

If it can be funded, increased public infrastructure spending, targeted tax incentives for property investors and developers, government backed loan programmes and a drive to fix the broken planning system could bring many new opportunities for the specialist finance sector in a rapidly evolving market.

 

Conversely, potential new regulations aimed at protecting tenants could impact negatively. Rent controls, if introduced, are unlikely to work and could potentially have the opposite effect, reducing profitability for landlords and forcing them and investor developers to exit the market and invest elsewhere. However well-intentioned, moves here could significantly exacerbate existing problems in the market...

 

In addition, there are also worries about what Labour might do with Permitted Development Rights (PDR) with suggestions they could reform or even abolish their use. On a macroeconomic level there are concerns about how capital gains and other taxes, in combination with other new policies, will impact interest rates. These are concerns that are already prompting some investors/landlords to look at selling and crystalising gains before Labour even get into power.       

 

In summary, the prospects seem mixed, but one thing is for sure, if Labour want to improve the property market and support the specialist lending sector they would be well advised to understand and acknowledge their importance to the general economy.  Don’t treat this key economic driver with the disregard the Conservatives have by changing the housing minister every few months!

 

Any new government must be strongly committed to working with the property sector and truly understand it’s importance to the economy. Only with continuity, certainty and the development and implementation of a strategic plan will new reforms and initiatives be successful.

 

If, as predicted, Labour win on the 4th July, they will face huge challenges but with the right attitude and a collegiate approach to working with all property market stakeholders, we could be at the start of an exciting period, just as we were in 1997. Now what was that D:Ream anthem again?!  

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