London Property Prices & The Election |
2024 is the year of the politician!
A depressing thought, I know.
Globally, elections will affect over 4 billion people.
In the UK the pundits and polls are predicting a victory for the Labour Party, which is causing apoplexy amongst Conservative voters and has led to the inevitable question – what does this mean for the Prime London property market?
Conventional wisdom will tell you that Labour governments are very bad for property prices. But if you know anything about conventional wisdom, you will know that it is wrong pretty much the entire time and this is no exception.
The belief that Labour is bad for property probably stems from the disastrous period in the 1970’s when the UK was regarded as the “sick man of Europe”. The economy was a mess, inflation was rampant and Labour happened to be in charge from 1974 to 1979 during which time there were mass strikes and the “Winter of Discontent” in 1978/9.
As you can imagine, this wasn’t a good time for property prices which had started falling in 1972. As it happens, the Tories were in power from 1970-74 so lambasting Labour seems easy, but they were not solely to blame.
In fact, berating either party when it comes to property prices is fair because neither party has a clue what they are doing. And if you don’t believe me, perhaps you could tell me why we have had 23 housing ministers in the last 27 years?!!
London Property Prices & Election Impact: Navigating Market Realities
As I show in the talks I give for private banks, law firms and tax advisers, the political party in power is irrelevant for property prices. The property cycle repeats like clockwork irrespective of who is in power because there are forces far more powerful at work.
For example, Labour were in power from 1997 to 2008 and presided over a massive house price boom and then crash. Prior to that the Conservatives were in power from 1979 to 1997 and presided over a massive boom and a massive crash.
And Keir Starmer is no Jeremy Corbyn. His proposed policies could have affected the property market (although most of what he promised would have been very difficult to turn into law) which is one of the key reasons he was destroyed in the election
Of course, you may be worried about the Labour promise to abolish the non-dom regime. But consider this from The Daily Telegraph which reported on figures that HMRC and Pinsent Masons published:
“To match the £8.2 billion (tax) from just under 115,000 non-domiciled residents, you would need the contributions of around 10 million lower-income income taxpayers. The income tax paid by the bottom 50 per cent of taxpayers, around 14.65 million people, would marginally beat the amount paid by the non-doms, comprising 9.8 per cent of the total income tax take.
Just to repeat that point, 115,000 non-doms are paying as much tax as 10 million British workers.”
And they are paying only marginally less than the bottom 50% of taxpayers.
Now these figures are a few years out of date, but they will not have moved dramatically. We also know that the civil service is against abolishing the non-dom status. They are aware that it is an important way to attract the world’s best talent as well as significant sums of money; the money may not all be taxed directly but it also feeds into the UK system through VAT and the inevitably huge spending by the non-doms.
Consequently, while I am sure that the non-dom status will be abolished in name, it will simply be replaced by something else. This may not be quite as attractive as the current regime, but it will still serve the purpose of attracting the world’s best talent. Of course, the press will look at the worst-case scenario and report it as if it was fact/a certainty, so you need to be very wary over the next few months.
In short, if you think the election will have a dramatic effect on prices, then you are looking in the wrong direction. I go into this in far more detail in my latest Prime London Property Trends Letter. If you haven’t received it already, then please email Dee, my assistant, at email@example.com to request your copy.