Labour government would see house prices fall: Zoopla
05-08-2015
By Donia O'Loughlin
Property website Zoopla has issued a statement on the eve of the general election claiming that a Labour government would cause house prices to fall as a range of interventions make investing in property less attractive.
Zoopla said Labour will make property a generally “less attractive investment” as a result of new property taxes, while prospective buy-to-let investors might be put off by rent controls and first-time buyers could be left worse off due to changes to schemes such as Help to Buy.
However, some would argue that dampening house price growth and even prompting a decline might be the most beneficial change for hard-pressed prospective first-timers, who are reportedly less confident than ever of getting on the ladder due to runaway valuations.
In an editorial earlier this year, FTAdviser sister paper the Financial Times called for a “government brave enough to trumpet the virtue of falling house prices, and to make it happen”.
Zoopla estimates that property prices have risen 9.7 per cent on average across the country over the past five years.
According to Nationwide’s latest house price index, published at the end of last month, annual house prices rose by 5.2 per cent in the 12 months to April alone. Office of National Statistics’ data in February showed an annual 7.2 per cent rise.
Latest ONS figures suggest the average house price is now £267,000, 10 times the average wage in Britain. Data from the Land Registry showed that the average price of property in London is currently at £462,799, some 17 times the average wage.
Focus has fallen at times on buy-to-let, which has surged in recent years, and in particular on the estimated £5bn of tax relief on mortgage interest which has supported returns substantially higher than rival asset classes over the past 15 years.
Lawrence Hall, head of communications at Zoopla, said: “There is no question that there are issues to be resolved in the UK property market, including a possible tax on unoccupied residences, an update to council tax bands, clamping down on rogue landlords.
“The most important way to solve the UK’s housing issues is to build more homes – not destroy the value of those already built.”
Labour has committed to building 200,000 homes a year by 2020 along with creating a ‘future homes fund’, using money saved in Help to Buy Isas to boost housing supply. For private renters, it will make three-year tenancies the norm and cap rent rises to inflation plus 1 per cent.
The Conservatives have pledged to build 200,000 starter homes for first-time buyers and extend the controversial Right to Buy scheme for up to 1.3m tenants of housing associations in England, along with the creation of a £1bn brownfield regeneration fund.
The Liberal Democrats aimed to build 300,000 homes a year, including in 10 new ‘garden cities’. They also promised new ‘rent-to-own’ homes where monthly payments steadily buy a stake in the property, along with a ‘help-to-rent’ tenancy deposit loan to help young people.
Yesterday (5 May), developers, pension funds and housing associations offered £30bn to the next government for new homes if they support a US-style rental revolution in the hope this would address the demand/supply issue, in an open letter.
The amount is potentially enough to build more than 150,000 homes housing around 350,000 people, the backers claim.
Zoopla is arguing that a continuation of the current coalition would likely result in the “continued recovery” in the housing market, largely due to an “improving economy”, higher employment and “policies designed to further encourage property ownership and investment”.
Mr Hall said: “The proposed mansion tax is a great example of a good political soundbite but a poor policy. It started out as an idea to tax billionaire non-dom property owners and has turned into a proposed tax on working British families.
“UK homeowners already pay the highest property taxes in the developed world, so the introduction of any new tax would be value destructive to the entire UK property market.”