REAL ESTATE REFORMS: THE UK’S MOST POPULAR PROPERTY POLICY IDEAS ® MFS Real Estate Reforms: The UK’S Most Popular Property Policy Ideas On 24 June 2016, the UK awoke to the news that it would be leaving the European Union (EU). This momentous announcement came about as a result of a public referendum the day before, which would ultimately decide the future state of relations between both actors. Over two years on since this historic vote, the UK has witnessed the appointment of Theresa May as Prime Minister, the formal beginning of Brexit negotiations, a snap general election resulting in a Conservative-led minority government, and interest rates rising for the first time in over a decade after reaching a record low 0.25%. With the official date of the UK’s withdrawal scheduled for 29 March 2019, the ability of the Government to effectively manage Brexit is currently under significant scrutiny, not least due to the limited progress that has been made during negotiations between the EU and the UK. More recently, the Prime Minister has faced internal rifts between v arious factions of the Conservative Party; the resignations of David Davis and Boris Johnson from their respective positions as Brexit Secretary and Foreign Secretary have revealed the difficulty in balancing the demands of those wanting a soft Brexit and those opting for a harder stance. The on-going political manoeuvrings surrounding the country’s departure from the EU are having knock-on effects in many industries, not least the UK’s globally-renowned property sector. Indeed, following a cabinet reshuffle, Dominic Raab left the position of Housing Minister and was appointed as the new Brexit Secretary. As a result, Kit Malthouse was named as Raab’s successor, making him the 17th Housing Minister since 2000. The timing of this appointment could not be more critical – demand for real estate is outpacing supply, and this is creating challenges for renters, prospective buyers, homeowners and seasoned investors. As Malthouse enters his new position, Market Financial Solutions (MFS) set about uncovering the policies and reforms that the public would most like to see the new Housing Minister introduce. To do so, MFS has commissioned an independent, nationally-representative survey amongst over 2,000 UK adults uncovering the most attractive property-related initiatives people would like to see feature on the Government’s agenda for the country’s real estate market. As well as revealing the sentiments of the public as a whole, the findings of this timely research are broken down into three different demographics, unveiling exactly what renters, homeowners and property investors would like to see the Government introduce. A summary of the key research statistics MFS surveyed a nationally-representative sample of more than 2,000 UK adults to uncover the key property-related policy reforms they would like to see introduced. The research found: • 55% of Britons strongly support the introduction of new laws to prevent gazumping, with this number rising to 64% amongst those who own a residential property • Over half (52%) of all people believe caps should be introduced to restrict the number, value or location of properties that can be bought by non-UK residents • 49% of UK adults would welcome the introduction of a housing tribunal system with the powers to review rent rises on individual properties Profiling the UK property market Worth an estimated £5.9 trillion, the UK’s residential property sector makes up a major part of the national economy. Transactions range from the regular rental payments from a tenant to a landlord to a homeowner paying off their mortgage for a property acquisition. And despite the ambiguous nature of Brexit negotiations, the UK property market remains a popular asset class amongst investors and prospective homeowners. Earlier in the year, MFS revealed that over half (53%) of investors would rather invest in traditional asset classes such as property in 2018 instead of investing in newer asset classes, such as cryptocurrencies, with 63% regarding property as a safe and secure asset in the current market. Part of this attraction stems from real estate’s historical performance, offering strong returns in times of economic and political transition. To uncover the composition of the residential real estate market, Market Financial Solutions asked the nationally-representative sample to identify which statement best describes their current status – someone who rents with no intention of buying a property in the coming 18 months; someone who rents and wishes to buy a property by 2020; someone who owns just one residential property; and someone who owns two or more residential properties. The research found that over half of UK adults (52%) own one residential property in the UK – equivalent to 26.92 million people. Meanwhile, a further 4% of the UK population own two or more residential properties. When it comes to the rental market, MFS’ research revealed that 25% of Britons live in rented accommodation and have no intention of buying a property in the coming 18 months. This compares to 7% of Brits who live in a rental property and are planning to buy a home by 2020, with the remaining 12% living in different circumstances such as with parents or with no fixed abode. What policy reforms are the UK most eager to see? In response to the myriad of challenges currently facing the UK property market, including housing affordability and access to finance, Market Financial Solutions proposed a series of measures concerning renters, homeowners and investors. The sample was asked about the extent to which they agreed or disagreed with the policy proposals, ranging from stamp duty reforms to the removal of inheritance tax on all property. The purpose of this study was to reveal how the Government can better improve access to an asset that remains in such high demand. The table overleaf has ranked the potential reforms in order of their popularity amongst the UK public, inclusive of renters, homeowners and buy-to-let landlords. Rank Proposed policy measure Percentage of UK adults that agree 1 New laws to prevent gazumping 55% 2 Restrictions on the number, value or location of properties that 52% can be bought by non-UK residents 3 A housing tribunal system that would have powers to review rent 49% rises on individual properties to ensure they are fair 4 The removal of inheritance tax on all property assets 46% 5 Financial incentives for people seeking to renovate derelict 44% properties and put them back on the market for sale or rent 6 A cap on the number of residential homes that can be owned by 41% one person 7 New incentives such as a reduction in stamp duty or increasing 40% the scope of Help to Buy schemes for both first-time buyers and existing homebuyers who purchase a new-build 8 The introduction of long-term tenancy agreements with a 36% minimum three-year term for landlords and tenants 9 Council tax for rental properties to be paid by the landlord and not 34% the tenant(s) 10 Reforms to stamp duty so that it is payable by the seller as 19% opposed to the buyer Of all the reforms proposed, MFS’ research found that 55% of Britons strongly support the introduction of new laws to prevent gazumping, with this number rising to 64% amongst those who own one residential property. Public support for this reform clearly demonstrates how common it is for people to lose out on a property acquisition due to last-minute bids being made by rival buyers. Earlier in the year, MFS revealed that gazumping remains a major contributing factor for property chains collapsing, with 39% of people who have experienced a property deal fall through stating that it was due to the seller accepting a better offer from another buyer. The second most popular policy reform concerned foreign ownership of UK residential property. At the moment, there are no restrictions on foreign ownership of residential property in the UK. However, there are rules in place to ensure the appropriate tax is paid when a property is purchased; additional taxes also apply for any rental income received from this acquisition. Nonetheless, over half (52%) of respondents support restrictions on the number, value or location of properties that can be bought by non-UK residents. The third most popular policy reform regards greater government power to regulate the rental market. Namely, 49% of UK adults would welcome the introduction of a housing tribunal system with the authority to review rent rises on individual properties. This jumps to 58% for those renting with no intention of buying a home over the coming 18 months. Balancing the demands of renters and homeowners Analysis of the research based on different demographics revealed a significant – and understandable – divergence of priorities between renters and homeowners. For example, 41% of the UK population support a cap being placed on the number of residential properties that can be owned by a non-UK resident. However, 47% of those who currently own more than one property are against such a cap being placed. The issue of taxation also featured high on the list of priorities for those who own multiple properties. Over three-fifths (62%) of people with more than one property support the abolition of inheritance tax on property assets – this ranked as their top policy desire. Rising house prices have led to an increase in property wealth amongst UK homeowners. However, with the current inheritance tax threshold at £325,000, a growing number of people are finding themselves liable to pay the tax when inheriting real estate. Finally, the MFS research found that a significant number of homeowners support financial incentives for people seeking to renovate derelict properties and put them back on the market for sale or rent.