Labour is pledging to take the fight to the Conservatives, with Sir Keir Starmer declaring yesterday that it will become “the party of home ownership” if it enters government.
Labour will give local authorities more power to build on green belt land to meet their area’s housing needs if the party wins at the next general election, Starmer said. He also pledged that house prices would come down under a Labour government.
But Dominic Agace, chief executive of leading estate agents Winkworth, has warned that Starmer’s comments on vowing to make Labour the party of housebuilding and home ownership need to be weighed against the realities of the housing market and development industry.
Agace said: “The Labour leader should be wary of intervention affecting the business models of large developers. Land banking allows them to continue to build through the inevitable property market cycle so they can build even when costs of land rise at the peak of a cycle. Planning issues means that only large developers can afford the delays and costs of the current process. It would be far better to resolve planning so small developers can thrive and we aren’t relying only on large housebuilders to deliver new homes.
“As for prices going down under a Labour government, millions of people are already having to absorb increased cost of debt, having worked years to get on the housing market and now they are being told they could face going into negative equity.”
Agace, like many people operating in the housing industry, wants to see “a stable housing market growing in line with inflation”.
He continued: “The housing market is in crisis, with rents rising rapidly recently after a sell-off by landlords in the face of tax changes. A lack of new homes being built is set to exacerbate structural supply and demand issues for the foreseeable future. With these issues, housing has never been such a political issue. With that comes the dangers of over-intervention having unintended consequences that add to the problem rather than solve it.
“In some ways both parties are now trying to occupy the same ground, competing for the votes of the first-time buyer and generation rent with proposed incentives for FTBs and further regulatory reform to support tenants. In many ways, a Conservative or a Labour government will have the same impact as they push through these agendas, as we start the countdown to the next election and the parties seek to win votes – with the housing market at the core of their pitch to the electorate.
“The dangers are already here and it now depends whether a Labour government will exacerbate them. Support for first-time buyers is a positive step, but without actual action on supply and planning reform, this will be a one hit wonder – with future first time buyers facing an even steeper challenge. The Conservatives have clearly defeated themselves by missing their housing targets. Labour have spotted this opportunity and are pushing their commitment to build new houses and council houses, which one can only hope they deliver if they come to power.”
He added: “The big concern is the private rental sector where private landlords are starting to not see a future with rising costs of finance and tax changes meaning they pay tax on income they do not receive and their investments are underwater. The issue is if they do sell off, then rents will rise further and competition will increase. The answer to this is not rent caps. We have seen in Scotland how this will disincentivise investment in the sector by institutions or private landlords, affecting the availability for people who want to live near their workplaces. This is undermining the appeal of our cities as places to move for career reasons. In the case of London as a global business centre, international workers coming to the capital for work can’t find accommodation.
“We need to encourage a healthy private rental sector to ensure that young people can live in cities, and not force them all into larger rental schemes without offering the choice of more central locations. We do need both options and responsible regulation to ensure a fair market place.
“The other threat for prime markets is a stated intent to increase tax on overseas investors. We have seen in recent years that tax changes and economic credibility do affect buyer demand in prime markets. London needs to continue to be open and welcoming to overseas investors to continue to thrive. If Labour pushes them too far, international investors will choose other cities to the detriment of the economy in London and UK as a whole.”
