What do the ‘political tea leaves’ indicate?

There’s a growing belief the Conservatives are just one electoral jolt away from hijacking some of Labour’s rental sector policies in a bid to woo younger voters.  With reports last week of 16m UK citizens renting over the coming years, it is clear tenants will become an increasingly powerful electoral force.

Just last week the editorial in the right-wing political magazine The Spectator, advocated that the Tories steal Labour’s policies on rent caps and longer tenancies - or risk losing the next general election.

If the Conservatives do badly in next Thursday’s local elections, the increasingly common view is that the party should become more pro-tenant and by implication more anti-landlord.

So, if the Conservatives lose local council seats in London, will they start demanding policies to win back disillusioned young voters in time for a General Election in 2022?  And will they start with the disillusioned young people who feel that they have been forced to rent by unaffordable house prices, mortgage lender demands for large unattainable deposits and by the burden of student debt repayments.

So, what might these further reforms target?

They could introduce rent caps aligned to local salaries. They could make 24 or even 36-month tenancies standard.  They could give further planning advantages to Build to Rent.  They could further raise stamp duty and capital gains tax on second homes. And, they could clampdown on incorporated landlords.

Will such reforms benefit the rental market?

In the main, no.  Any easing of planning restriction to create new rental properties is to be welcomed, but the reality is that there is already insufficient available properties for rent, and anything that discourages private or incorporated landlords from investing in new property is likely to exacerbate the supply crisis.  Further constraint on supply will perversely drive-up rents, causing further demands and pressure for rent caps to keep renting affordable.

Unfortunately, the reforms being demanded by the Labour party and increasingly stolen and rebranded by the Conservative party are not conceived as a rational well thought out response to a difficult market situation, they are purely aiming to be popular with lots on young voters.  To hell with solving the problem, let’s just do what’s popular!

So, what should landlords do?

Those with properties should hold-on to their valuable assets – they are the lucky ones.  Further changes to the tax system are unlikely to be sufficiently significant to undermine the returns and value of their assets.  Those wanting to expand their portfolios should probably get in quick – it seems unlikely that barriers such as the stamp duty surcharge will be repealed and more likely that they will become tougher.  Those with a longer-term plan? - it is probably a wait and see and compare the returns from buy to let to other investments at the time.

I think all buy to let investors though need to consider the wider investment climate, and the potential volatility of alternative investments.  Oxford’s Global profile as a centre for learning, a beautiful historic city and a vibrant knowledge-based economy will create stability of demand for accommodation.  As the plans to join together Oxford and Cambridge materialise, housing supply will increase progressively over the coming 10 to 15 years.  Until then, demand for good quality private rented properties will continue to grow.  So landlords, keep calm & carry-on investing, but keep an eye on the politicians, they don’t have your best interests at heart!