Build baby, build!
Labour has ambitious plans to build 1.5 million new homes over the next 3/4 years. This is likely to have significant effects on the property market and broader economy. Let’s take a look at them.
House Prices
- If Labour successfully increase the housing supply it could help stabilise or slow down house price growth, particularly in high-demand areas like London and the South East
- However, the effect on prices will depend on where homes are built. If concentrated in lower-demand areas, prices in key hotspots may not be significantly affected
Rental Market
- While increased supply may ease long-term rental pressures, demand for rental properties is expected to remain high, particularly in major cities where population growth continues to outpace housing delivery
- If house price growth slows, landlords looking to expand their portfolios may find more affordable properties, especially in areas targeted for development
- A higher supply of homes could soften rental price growth, but well-located and high-quality properties will continue to command strong yields. Landlords focusing on energy-efficient and modern rental properties will remain competitive
- While rapid house price inflation may slow, increased housing supply in the right locations with good infrastructure investment could still deliver long-term capital appreciation
Developers & Investors
- Large-scale construction could impact profitability for major housebuilders, especially if they are required to deliver more affordable housing
- Investors in buy-to-let properties may see softer capital appreciation if house price growth slows
GDP Growth
- Housing construction contributes significantly to GDP, so a successful building programme could stimulate economic growth.
- Infrastructure investment alongside housebuilding (roads, schools, public transport) will further boost economic activity.
Planning System Overhaul
- Labour has promised planning reform, including taking on ‘NIMBY’ opposition. If successful, this could speed up development and encourage private investment in housing projects
- If planning reform fails or faces resistance, Labour may struggle to meet its housing targets, limiting the expected economic benefits
Impact on Inflation
- Increased supply could help reduce housing-related inflation, particularly rents.
- However, a surge in construction activity could push up wages and material costs, feeding into broader inflationary pressures.
Overall, while Labour’s housing plans may introduce some short-term shifts in the market, landlords who strategically manage their portfolios and plan accordingly for changing regulations and economic outcomes, can still find strong growth.
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