The UK property market has been braced for a (hard) Brexit battering for a while but has performed reasonably well bar a market correction end of 2018. The not so insignificant fact that UK hasn’t yet left the EU must have had a part to play in it.

There are however fresh jitters for investors, landlords and agents in the looming possibility of an even bigger threat to their property portfolio – in the shape of Jeremy Corbyn.

While the property industry as a whole saw a sharp slowdown ahead of the original 29 March Brexit deadline, the high number of mortgage approvals (April had the highest since February 2017) would suggest the market is still resilient despite the ‘long-standing threat of a Corbyn government’.

Labour under Corbyn is a form that hasn’t been around since the 1970s and have been signalling the changes they would enforce should Labour return to government, most notably the control of house prices:

  • One of the proposals is for Bank of England to issue a ‘house price growth guide’ similar to the one for inflation, which will be kept under review through the Bank’s Monetary Policy Committee. The control of mortgage lending will be a method of reducing house price growth if it exceeds any target figure introduced by Labour. While this isn’t official Labour policy it has been floated by the Shadow Housing Minister and has caused concern.
  • Labour could go one step further and introduce a cap in house price growth, in the same way the Bank of England is targeted to keep inflation at a certain level. In theory, a target could vary from region to region. Labour cites this as a bid to close the gap between property prices and average incomes.

Labour also wants to ‘put power in the hands of tenants’ with a £20million of funding for renters’ unions as announced by the shadow housing secretary Jon Healey at the last conference. The new renters’ unions would provide advice and representation for the 11.5 million private renters in the UK.

  • The idea is that the unions would mirror organisations such as the National Landlords Association (NLA), which represents the UK’s 30,000 private landlords. The NLA has welcomed the announcement on funding for renters’ unions, however adding that the unions should remain ‘politically neutral.’
  • Introduction of ‘indefinite’ tenancies to offer greater security to renters should only strike fear in rogue landlords. It should be welcomed by Build-to-Lend developers benefiting from longer commitments from tenants and will drive the growth of PRS segment of the market.
  • The Tenant Fees Act coming in to force this weekend (1st June) will end letting and other upfront fees, evidence that tenant welfare has taken importance by the Tories as well.

High Net Worth (HNW) individuals and overseas investors are more cautious on how Labour would tax wealth, income and inheritance and pose a far greater concern than the fallout from a hard Brexit.

A ‘Mansion Tax’ or limitations placed in property ownership will also be on the cards should Corbyn’s Labour come into power and HNW and Ultra-HNW individuals wouldn’t risk tying their wealth up in property, by nature, an immovable asset. However, the declining property prices and a weakened Pound will be attractive to overseas investors.

  • A much talked about Wealth tax is sure to encourage capital flight, inhibit investment and lead to the depreciation of the Stirling.
  • While the UHNW have the resources to move to lower tax jurisdictions and those with ‘non-dom’ status and substantial assets outside the UK would be well advised to settle them in an offshore trust.

Perhaps it may yet be a case of ‘the bark being worse than the bite’, as Jeremy Corbyn is unlikely to command a parliamentary majority and will inherit an economy that would need to attract and retain wealth. Without a clear majority, Corbyn may have to park his more radical taxation and redistribution policies, instead working with his own moderate MPs and those in other parties to increase investment in infrastructure, research and development, and education.

It’s been said that ‘the tax tail should not wag the dog’, and it would hold water in times of political uncertainty as well.


May 2019



Photo Credit: Jordhan Madec