From a political perspective, UK-based buy-to-let landlords have had little celebrate over recent times. New affordability criteria for (re)mortgaging, the controversial “right-to-rent” scheme, and the tax “triple whammy” have hardly left buy-to-let-investors in the UK filled with good cheer. Nevertheless, the buy-to-let market continues to hold strong, there’s a very simple reason for this. In the UK there is a chronic shortage of housing in general, coupled with a significant percentage of people for whom renting is clearly the best choice for their life stage. The fact that international investors are making the most of the weak pound to buy up UK-based assets is merely a reflection of this, rather than a key driving force for behind the strength of the market. Now we have a forthcoming General Election, could this provide a welcome boost to buy to let? Answering this question requires looking at three others.
What is the impact of having an election?
Elections, fundamentally, are a choice between the status quo (the current government or their direct successors) and change and any time there is the potential for change there is an element of uncertainty. This means that the period just before an election can, in many ways, be the equivalent of a person holding their breath while they wait to see what is going to happen, hopefully followed by a sigh of relief. It’s also worth noting that even when an election result is as widely expected, it can take a little while for people to absorb the fact and decide what, if anything, they need or want to do about it. In the short term, that may mean that the buy-to-let market is “on hold” in many respects, until everyone concerned has a clearer idea where they stand.
Who will win the election?
People may feel cynical about opinion polls these days, but it’s a hard fact that Theresa May had to ask parliament’s permission to call an election about three years earlier than scheduled and therefore it’s a reasonable assumption that she thinks she can win it, or, perhaps it would be better to say, she thinks her opponents can’t. For their part, her opponents, theoretically, have a lot to gain, in that they have at least some sort of chance of taking power, and very little to lose in that the election will only extend the Conservatives’ mandated by another two years, assuming they win. A quick scan of newspaper headlines reveals that this seems to be a widespread assumption even former Labour leader Tony Blair saying that he expected Theresa May to win it.
What is the Conservatives’ attitude to buy-to-let?
If we assume that the Conservatives win the election, then it also seems reasonable to assume that, at least in the beginning, they will carry on along much the same path as they have been on so far. This includes a promise to “fix the broken housing market”. That’s a pretty broad statement, but the last couple of budgets give an indication of what the Conservatives currently see as their preferred approach. There has been money to build more new homes and higher taxation on buy to let. At current time, the government is also discussing a ban on letting agents’ fees to tenants. In short, the government seems to be trying to make it more of a buyers’/renters’ market. The problem is that the main reason housing in the UK has long been a sellers’/landlords’ market is because of the lack of supply and this is highly unlikely to change overnight or even in the next five years. What may well disappear are “amateur” landlords, possibly to be replaced by “buy-to-let” housing funds, which would allow people to invest in the buy-to-let market without actually becoming direct landlords. This would allow for a consolidation and, indeed, professionalisation of the market and perhaps create a more effective industry force to allow landlords to get their point of view across to decision makers. So, in short, although the election may cause some short-term pain in the buy-to-let market, it has the potential to bring a lot of longer-term benefits.