Labour won the general election last week and experts can already see some effect on the housing market. Let’s dive into what changes are already happening and what you can expect from Labour policies in the coming months.
What impact is Labour's win already having on the market?
Mortgage rates are going down
Even though the Bank of England sets interest rates, some mortgage lenders have already started offering lower mortgages rates as a result of Labour arriving in power. Once inflation is under control, the BoE is expected to cut interest rates. However, experts believe that the first rate cut may not lead to a significant reduction in fixed mortgage rates, as lenders base their rates on wider market expectations. It is advised that borrowers explore their options and secure rates as soon as possible. Homebuyers should also be cautious, as higher mortgage rates may limit their borrowing ability.
Rental market is shifting
Over 28,000 rental properties were listed for sale in June, which could be due to the expected rise in Capital Gains Tax (CGT). Labour also promised to implement stricter renting rules to protect tenants from housing insecurity. Some of their key measures include banning no-fault evictions and putting an end to rental bidding wars. Investors have also sold more properties than they have bought, which resulted in a net loss of 256,000 rental homes.
What can we expect from the Labour government?
Labour has made several pledges to shape a new and more favourable housing market for first-time buyers and renters.
Housing Development Targets and Policies
The government has set an ambitious goal to build 1.5 million new homes over the next parliamentary term, spanning from 2024 to 2029. This initiative aims to address the ongoing housing shortage and ensure adequate housing supply for the growing population. As part of this plan, there will be an immediate update to the National Policy Planning Framework, which will include the restoration of mandatory housing targets to guide development efforts effectively. Ensuring planning authorities maintain up-to-date local plans is also crucial to streamline the planning process and ensure that housing development aligns with current needs and regulations.
Sustainable Development and Land Use
To promote sustainable development, there will be a reform and strengthening of the presumption in favour of sustainable development, ensuring that new housing projects meet environmental and social sustainability standards. This could mean promoting housebuild that use energy-efficiency standards such as Passive House. A significant focus will be placed on prioritising the development of previously used land and fast-tracking approval for urban brownfield sites. This approach aims to revitalise urban areas and make efficient use of land resources.
Concurrently, there is a strong commitment to preserving the green belt, ensuring that natural and rural areas are protected from excessive development. The release of lower quality ‘grey belt’ land will be considered, along with the introduction of ‘golden rules’ to ensure that any development on such land benefits local communities and the natural environment.
New Communities and Strategic Planning
The plan includes the creation of a new generation of new towns and large-scale communities across England to address housing needs comprehensively. Effective new mechanisms for cross-boundary strategic planning will be introduced to facilitate coordinated development efforts across regions. Combined Authorities will be granted new planning powers, freedoms, and flexibilities to make better use of grant funding, enhancing their ability to address local housing challenges effectively.
There's hope the market will turn to favour first-time buyers
Financial Measures and Market Regulation
To discourage non-UK residents from inflating the housing market, the government plans to increase the rate of stamp duty surcharge for this group. This measure aims to prioritise housing for UK residents and reduce speculative investments that drive up property prices. The government has also expressed its willingness to make full use of intervention powers when necessary to ensure the success of housing initiatives.
Reforms to compulsory purchase compensation rules will be implemented to improve land assembly processes, speed up site delivery, and ensure that public benefits such as housing, infrastructure, amenities, and transport are achieved. In specific types of development schemes, landowners will be awarded fair compensation rather than inflated prices based on the prospect of planning permission, ensuring a fairer process for all stakeholders.
Affordable Housing and Homeownership
The government is committed to delivering the biggest increase in social and affordable housebuilding in a generation. To achieve this, planning obligations will be strengthened to ensure that new developments provide a higher proportion of affordable homes. There will be a particular emphasis on prioritising the building of new social rented homes to support those in greatest need.
The government will review the increased right-to-buy discounts introduced in 2012 and enhance protections on newly built social housing to maintain an adequate stock of affordable homes. Local authorities will be empowered to give first-time buyers the first opportunity to purchase homes, helping more people get onto the property ladder.
Labour's Freedom to Buy scheme aims to make homeownership more accessible by providing financial support to first-time buyers and reducing deposit requirements. The policy also prioritises first-time buyers in new housing developments, giving them the first opportunity to purchase newly built homes. Another way people can step more easily onto the property ladder is by using homeownership schemes such as Shared Ownership.
Finally, a permanent, comprehensive mortgage guarantee scheme will be introduced to support first-time buyers who struggle to save for a large deposit. This scheme aims to lower mortgage costs and make homeownership more accessible for a broader segment of the population.