General election: what it means to property market?
Following on from yesterday's story about IRIS being the only vendor to have a volcano-related story, today we have the first – and so far only – general election-related news item. This takes the form of David Kempster, marketing director at MDA SearchFlow, explaining how the various possible outcomes are likely to affect the UK property market. (Cynics might say the Spanish property market might also be affected, as we all emigrate there…)
With the General Election just around the corner, the final outcome is still difficult to predict. However, whether we have a change of Government after the election or not, the outcome is likely to be a defining moment for the property market, especially in terms of how property information, future housing supply/demand, and technological developments will be affected.
The Conservatives have stated (in no uncertain terms) that they do, indeed, plan to abolish HIPs. The speed at which the consultation and suspension process is conducted will ultimately be a question of priorities. In the housing team, will HIPs really be a big deal when compared with “the big society” ideals on planning and house building?
Even so, the Conservatives are committed to removing regulations in this area, and to letting market forces dictate the future demand for upfront packaged property information. Grant Schapps has been consistent in his view that HIPs could be gone within three-to-four months, which has been given a further boost by the surprise change in the Liberal Democrats' manifesto, which expresses this same sentiment.
Personally, I foresee more focus on the EPC, especially if a Conservative/Liberal Democrat coalition is formed. Both parties have expressed a desire to enhance the EPC and deliver value off the back of it, such as the Conservatives' “Green Deal”. There could be a meeting of minds on this area of policy to drive energy efficiency further within the housing stock.
With the market still sceptical over Exchange-Ready HIPs, buyers' solicitors will always be suspicious of relying solely on information supplied by the seller, and will therefore want to obtain much of this information for themselves. It’s possible that a return to pre-HIPs property information could be accelerated to fill the void. At the same time, budget constraints and a need to streamline processes at a local authority level will necessitate driving down costs to meet the requirements for reduced prices for property search information. This could liberalise data – or constrain the speed at which it can be delivered – depending on how much investment is put into service delivery.
If re-elected, Labour will continue maintaining the existing momentum that HIPs have in the market. Many agents accept that HIPs have been in place for some time now, and welcome the margin opportunities that they can create. The CLG review over the summer may take a more detailed view at some of the remaining dysfunctions. Although this should be welcomed, I do not believe this review will yet address the fundamentals of why property information from source-to-consumer needs a root and branch reform.
In terms of the general health of the housing market economy, no matter which party wins the election, lending criteria by the main banks and building societies remains the overall driver of supply within the conveyancing industry. Clearly, with a deficit of more than £160 billion, the banks can expect further taxes on their profits. As a result, the banks will redouble their already considerable focus on risk when making lending decisions, resulting in even tighter requirements for borrowers and an increase in interest rates. This, together with rates of employment, are the key factors affecting the health of the housing market, rather than any stamp duty reduction or HIPs being suspended for first time buyers.
Housing supply and demand is teetering on a knife edge at present. It’s clear that the pace of house building needs to accelerate to match that of household creation. Under a Conservative government, new local housing trusts could give residents a direct say in what their local needs are, but could also stall planning decisions in a morass of “nimbyism”.
Although Labour has pledged an eye-catching figure of £105 billion to support house building, this needs to go hand in hand with reform of the planning process to ensure that house builders have the confidence to invest and to meet the demand, and also requires confidence by the banks in their capital lending.
As I write, there is an unprecedented build-up to the election, with a hung (or balanced) parliament very much in the offing. The key for the property market is whether this comes with a consensus for meaningful change to satisfy and create housing purchase, as well as concrete plans to reduce inefficiencies and concentrate on investing in market led technological innovation.
On technology, all parties have expressed their support for further e-Government as a way of managing down the deficit by reducing inefficiencies and driving down costs. We see a future where information is delivered electronically, from source to all parties visible in the transaction. This requires a new vision on the ideal platforms needed to connect the conveyancing industry together, including serious conversations about how data and documents are managed through the process. If it can be more efficient, lower risk, more transparent and quicker, it must surely benefit all of us, while also addressing some of the main dysfunctions that have led us to where we are today.