So, if Labour wins the general election next week - what kinds of changes are we going to see in the property investment space?
In all honesty, it looks like there's going to be quite a few. But good and bad?
You'd be surprised.
One of Labour's key aims is to ensure affordable housing through a number of strategies: through the construction of new affordable housing on grey-belt land, through regulation of landlord bidding wars, increasing the quality of currently existing buy-to-let properties, and last but not least introducing a national landlord register that will allow members of the public to quickly access information on specific landlords.
These plans will ultimately increase regulation in the private rented sector, but overall will prove to create opportunities perhaps not seen in recent memory. This is our take on Labor's upcoming policies, should they be successfully implemented:
Developing New Affordable Housing
Right now we are seeing high ROIs in a number of postcodes across Britain, and this is primarily down to high-demand meeting low-supply. This circumstance has been highly lucrative for many landlords as they allow renters to financially compete for the properties, whoever is willing to pay the highest gets the spot. This will be curbed however through the classification of 'grey-belt' land - a new type of land classified as poor quality or 'ugly' green-belt land.
All of a sudden we're going to see a large increase in building space.
Now if Labour can fulfill their development obligations we'll naturally be seeing a reduction in demand as more and more properties become available in and around each post-code. But this is something that will happen overtime, it's effects will be slow to implement.
This next point however will take direct effect:
Regulating Bidding Wars
Simply put, bidding wars and big up front payments to secure properties are going to be phased out for good.
Instead, what allows landlords to increase rent on property will be the actual quality of the properties themselves, as opposed to leveraging the demand. This is part of Labour's aims to increase the overall living standards across the board, and cut landlords setting prices higher than their asking price without first meeting property quality standards, and speaking of which...
Increasing Property Quality
Labour is going to clampdown on Landlord's management of properties, and increase the power of tenants. As of now too many Landlords are mismanaging properties, and frankly, making it look bad for the rest of us. This mismanagement will lead to tougher sanctions for bad landlords if Labour enters power.
The enforcement goes so far as to create a national register for landlords, allowing local councils to better track and enforce the new legislation against the landlords in their regions. This then continues into the standardisation of rental property quality across the board.
How is this going to affect property prices?
Now in terms of bidding wars, there is a caveatt to Labour's legislation - tenants can still offer to pay an increased rent to secure the property, so the more sought after postcodes will retain their positional leverage to some extent, however landlords will no longer incite the bidding themselves.
And it is this caveatt that makes the new legislation hypothetically difficult to enforce on a mass scale.
Where we will see bigger impact lies in the greybelt development plans and the housing quality standardisation, for while it might be difficult to trace how exactly an increase in rental costs has been incited, housing that does not meet quality standards is plain as day.
If your name ends up on a 'bad landlord' register, and the demand is reduced, there is a reduced demand for your individual property.
...So are there any upsides?
Potentially, these are early days and noone knows exactly how this is going to pan out. But throughout these tectonic changes to the market, should they all come to pass, opportunities can indeed be found:
Relaxed Planning Permission will apply to the private sector just as much as the Government.
It's going to be easier to build houses all over the country if the current planning laws are relaxed, or even 'bulldozed' as Labor rhetoric might suggest.
A Landlord Register allows you to leverage the quality of your service as a Landlord.
Simply put, while there is now the additional hurdle of registering to a landlord register, the only real way your returns will be affected will lie in your own personal responsibility as a landlord. This regulative legislation is designed to manage a booming rental sector that ultimately shows no signs of slowing down in terms of its demand.
And in fact, a landlord's register actually has some hidden benefits. A positive record on a landlord's register allows you to stand out from all the other options, and could even become leverage in itself for above-market asking prices on properties. The game of landlording is now in leveraging the highest quality service, as opposed to the most convenient.
Longterm Strategy
This housing shortage has come once, it will come again, and if Labor's ultimate objective is to reduce housing costs, then an opportunity to buy low and sell high is steadily approaching.
To conclude,
So to conclude, if all projected policies can be effectively employed we are going to see an initial reduction in housing prices over Labor's first term in office.
This will in turn create an opportunity to purchase property for greatly reduced prices, and relaxed planning permission will increase the abundance of land that can be built upon, and thus also drop the prices here.
Now while rental prices as well are going to see an initial reduction, the ability to leverage quality of landlord service through the landlord register will allow you to charge asking prices above market rates, finally leading to higher qaulity tenants.
Housing has never been a short-term strategy, and long-term wealth is exactly that: Long-term. In truth while we will see an initial reduction in housing costs, as the UK population continues to increase there will come a moment when the Labor party sets their sights on another sector of societal infrastructure, and once again demand is going to increase.
Right now we are being given an opportunity to plan for the future with reduced prices.
Keir Starmer has said it's a time for change, and a time to turn the page, and he's most certainly right.
And with great change comes great opportunity.
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