In an unexpected political twist, Jeremy Corbyn, the former planning chairman of Haringey council, with a no-frills, no-spin style, has become the leader of the Labour Party.
Many have written him off, but can a self-proclaimed socialist be good for the property market? And what changes might we see in our auction rooms if he takes up residency in 10 Downing Street in 2020?
At a time when local authorities face pressure to make cuts, the disposal of unprofitable and costly properties is a significant source of savings. The chancellor plans to generate £31.8bn through asset privatisation in 2015-16 alone. If seen through, it will be the largest amount of money raised through the disposal of public assets in any 12-month period in modern UK history.
But the auction route has come under direct attack from the opposition leader. A staunch critic of councils disposing of their assets, be it housing or public buildings, Corbyn has in recent times been scathing of his constituency in Islington for selling off a number of properties as “development opportunities”. He said: “The social value of the site is lost in the lottery of an auction…sold off to the highest bidder.”
Corbyn has also been debating rent costs. Although there is restored market confidence following the general election, the UK unquestionably has a problem at the moment in the form of rising demand for rental properties, and rents are high in comparison with the low interest rates being charged on mortgages. Corbyn argues that to tackle this there must be control on private rents.
However, I have been in this industry long enough to remember the rental control measures of the 1970s and 1980s. Rent controls reduce supply at a time when markets looking for long-term price reductions need rising supply, and they remove the incentive for landlords to properly maintain their properties.
Arguably, the threat of rent caps would make the rental market less attractive to investors. This would affect the auction market, as investors, seeing a reduction in their yields on the horizon, would begin to dispose of their less profitable portfolios. And the appeal of such stock would be reduced, which would likely leave it difficult to shift until such time as vacant possession would open it up to the owner-occupier market.
Another area in which Corbyn has big ideas is Right to Buy, which he wants to extend to tenants of large-scale private landlords. This would allow private tenants to become home owners at a big discount, by way of subsidised mortgage rates.
At first glance you would be forgiven for thinking this would mark the end of buy-to-let altogether, and indeed we may see stock of this nature going under the gavel from landlords concerned about the impact of this proposal on their portfolios.
Reading beyond the attention-grabbing headlines, it is clear that landlords receive the market value for their property. But it is nonetheless a worrying prospect for those hoping to sell property to first-time home buyers, as it provides a cheaper alternative without the hassle of having to move house.
And indeed it will be taxpayers who would ultimately foot the billions of pounds this proposal would cost to implement. Even if such a huge and sudden increase in tax-funded public spending was politically achievable, it would significantly reduce the disposable incomes of working families, hurting the very people he is seeking to help.
Arguably, Corbyn has one of the most property-centric agendas of any high-profile politician in recent years. He has emphasised his determination to tackle the housing crisis, and his shadow cabinet features a whole team of ministers dedicated to housing issues where previous front benches have only had a single minister.
But Corbyn’s proposals are, in my view, overambitious, and I will watch with interest to see how the next few months play out.
For now, the Conservative majority has arguably brought greater certainty over the political landscape and economic policy, which has allowed both prime and mainstream markets to gain some momentum.
Our busy auction rooms confirm that confidence among buyers is back, and the strong results we have achieved post-election provide evidence that good-quality, income-producing stock is highly sought after.
In the short term, I do not foresee Corbyn’s appointment causing a shockwave. So, for now, it’s back to the business of auctions.
Robin Cripp is chairman and principal auctioneer at Andrews & Robertson
