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What Impacts Might Property Investors See From A Labour Government?

What Impacts Might Property Investors See From A Labour Government? Hello everyone, I hope you are well. In today’s post, I will be sharing a guest post from property expert Ritchie Clapson, CEng MIStructE of propertyCEO. Ritchie will be exploring how a Labour government might impact property investment. With an election looming, investors (big and small) will inevitably be wondering what impact a new government, especially from a different party, will have on them and their property investments and plans.

What Impacts Might Property Investors See From A Labour Government?

Politically (if not meteorologically), things are starting to warm up – we get our say in the General Election soon. The public has been becoming progressively unhappier with the Tories’ uninspired performance in office, and Labour politicians have so far been able to see their popularity soar by doing nothing much other than watch the ‘own goal of the month’ contenders line up on the opposite benches.

Unfortunately, to borrow a metaphor from the entertainment world, booing off one comedy act doesn’t guarantee that the next bunch of jokers will be funnier. And so, now we’ve reached the sharp end of an election, reality bites, and, for a change, the audience starts listening a little more to their heads than their hearts. What exactly will a Labour government be bringing to the table?

Landlords

My first observation is that I don’t generally see a sea change in property investors’ treatment. The current government has belatedly worked out that encouraging landlords to sell up through increased taxation or regulation doesn’t help anybody. This means there are now more properties for sale, but unfortunately, tenants can’t afford to buy them. Consequently, there are now fewer rental units on the market, which means that rents have gone up, thus making it more difficult for tenants to afford to rent anywhere.

If only someone could have told the government in advance that this would happen (if I had an ‘irony’ emoji, it would go here). And then we have the now-shelved Renters (Reform) Bill, the mere threat of which was enough to scare thousands of landlords out of the sector. I’m afraid I can only see any new iteration of the Bill being more draconian for landlords under a Labour regime.

Labour has also started mentioning rent caps, yet another policy guaranteed to scare the horses.

Wealth Is Relative

Are landlords all wealthy? According to the government’s 2021 English Private Landlord Survey (updated in March 2024), 45% of individual landlords own just one buy-to-let property, with 40% owning between 2 and 4 properties. The report states that the average earnings for ALL landlords’ (EXCLUDING rental income) is just £24,000 per year and that their median age is 58. So, we’re not talking big earners here. What happens if we add in their rental profit?

The median gross rental income was £17,200, from which they would need to deduct mortgage repayments, agency fees and running costs to arrive at a pre-tax profit. Each landlord’s costs will differ, but we’re not considering a king’s ransom.

So, how much more regulation and taxation are these landlords likely to accept before chucking in their towels?

Many such landlords are accidental – perhaps they kept a flat when they married or inherited a house when their parents died. Super-rich? No, just ordinary people. A policy aimed at ‘taxing the rich’ may end up forcing ordinary folk to sell up a property they may have hoped would help them survive in old age.

But What About Property Development?

As more and more landlords have felt the pipes squeaking on their buy-to-let portfolios, many have moved into small-scale property development to offset the pain. For many, the type of projects they undertake are just one step up from those they’ve done previously, such as creating an HMO or doing a refurbishment.

Simply putting flats above a shop or converting a small commercial building can be expected to generate a six-figure profit, so no wonder there’s a healthy appetite. It certainly puts the average landlord’s buy-to-let profits in the shade. So, will Labour’s approach to property development differ from that of the Tories, who have actively encouraged it by creating many new permitted development rights in England?

In my opinion, there’s unlikely to be too much change. The reason for this is that the housing crisis is an indisputable fact, it’s getting worse rather than better, and it’s impossible to fix unless the government of the day is prepared to ignore the squeals of NIMBYs across the land and start building lots of new houses. Which no government will do because almost every homeowner is a NIMBY (to see if you’re a NIMBY, ask yourself whether you would like to have a new affordable housing estate built at the bottom of your garden).

Need For New Homes

We need to build around 4 million new homes, which is the equivalent of around 15 Oxfordshire, so we’re not realistically going to be able to avoid the green belt or stick them all somewhere out of the way where no one will notice.

Labour reckons it could build some new towns – around 1.5m homes – using the ‘grey belt’. This is green belt land that already has something built on it, such as car parks or petrol stations. They’ve stipulated that 50% of grey belt development must be affordable housing, but it’s not clear how the economics of this will stack up for developers who will need to make a profit. This focus on the grey belt hasn’t gone down that well with the countryside charity CPRE, who argue that we should instead turn this grey belt back into a green belt.

Which you might think is instead ignoring the housing crisis until you realise that we could build 1.2 million new homes using existing unused brownfield land. These are existing commercial properties and land not in the green belt, which could be converted to residential use. CPRE, not unreasonably, believes we should be starting with unused brownfield land first instead of targeting the grey belt.

These brownfield sites are a rare political win-win. They positively impact the house-building numbers, plus voters are generally happy for these sites to be converted. It also will have more people living in our town centres, which will benefit local economies. On that basis, I can’t see Labour deciding that brownfield conversions are a terrible idea. It should also be good news for landlords and investors because larger housebuilders won’t touch small commercial conversion projects since most lack the skills or appetite to do them. This leaves more opportunities for first-time property developers.

For more information, see https://webinar.propertyceo.co.uk/s/McRGnM (or use the attached QR code)

So, overall, possibly a slightly worse climate for investors if Labour wins, but most probably no significant changes and business as usual in property investment.

I hope you enjoyed that.

Talk soon.

ABOUT THE AUTHOR

Ritchie Clapson CEng MIStructE is a veteran property developer of 40+ years, an author, industry commentator, and co-founder of the leading property development training company propertyCEO. Ritchie is passionate about tackling the lack of housing in the UK and helping ordinary people to be part of the solution. To discover how you can get into property development, visit www.propertyceo.co.uk

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12 Comments

  • Fransic verso

    This is interesting, there are a lot of things that go into real estate investing, and I learned new things from your post. This is an informative and awesome post, thanks for sharing it with us.

  • Elizabeth Flores

    My father had a rental properly and it definitely was a headache. I agree that most rental property owners are not as wealthy as people think, it takes a lot to manage.

  • barbie ritzman

    Great insights into how political changes can affect property investments! It’s important for investors to stay informed and adaptable. Thanks for the thorough analysis!

  • Mila R

    It seems that a Labour government might pose challenges for property investors, particularly landlords, potentially leading to increased regulations and taxes impacting their profits.

  • Ramil Hinolan

    Interesting insights. It seems like a Labour government might bring some challenges for property investors, especially landlords. They might face more regulations and taxes, which could impact their profits.

  • Kimberley Asante

    This article provides an insightful analysis of how a Labour government could impact property investors. It discusses potential changes in regulations, taxation, and development policies, offering valuable information for landlords and developers. Great read for anyone involved in property investment!

  • Beth

    I’m not surprised that landlords aren’t the super wealthy moguls that some people think they would be. I used to have a rental property here in the states, and regular upkeep alone took a huge chunk of the profit out of it. I eventually sold because it just wasn’t worth the effort.

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