It is still too early to know exactly what Andy Burnham’s Labour government will mean for property, business and investment. The final detail will be crucial of course but the likely direction is becoming clearer.
We can probably expect a stronger focus on regional growth, devolution, public investment and council housing. We may also see a tax system that places greater weight on property, land and accumulated wealth.
For investors, developers and business owners, that could create both opportunities and risks.
DEVOLVED MODEL
Burnham has long argued that too much power and investment is concentrated in Westminster and the South-East. A more devolved model could give regional mayors greater control over housing, transport, skills and economic development, creating real opportunities.
Areas benefiting from new transport links, public-sector investment, regeneration funding, hospitals, universities or major employment projects may see stronger demand and longer-term value growth.
The opportunity will not simply be in buying where property is cheapest. It will be in identifying where infrastructure, employment and housing policy are moving in the same direction.
HOUSING AGENDA
Housing is also likely to sit much higher up the agenda.
A major increase in council and affordable housebuilding could create significant work for developers, contractors, lenders and investors able to partner with local authorities and housing associations.
Public land could also be released for development, potentially opening opportunities for smaller and mid-sized developers.
But there is a risk that, if policy becomes too hostile towards private profit, landlords or institutional capital, the government may find that the investment needed to deliver new housing simply moves elsewhere.
Private investment can work successfully alongside public policy, but it still requires a reasonable return and a sufficiently stable set of rules.
TREASURY COFFERS
Property taxation is probably the biggest area to watch.
Burnham has previously shown interest in shifting taxation away from transactions and towards property, land and wealth.
Replacing stamp duty with a recurring property tax could improve market activity by reducing the cost of moving.
But it could also create a permanent annual liability for owners of higher-value homes and investment properties.
That would be particularly relevant in London and the South-East, where property values are high but rental yields are often relatively low.
Owners who are asset-rich but income-poor could be hit hardest.
Landlords, second-home owners, overseas investors and those holding vacant property are also likely to face increased scrutiny.
None of this means owners should panic or start selling assets based on speculation, but it does mean portfolios should be reviewed properly.
A highly leveraged, low-yielding property may look much less attractive if finance costs remain elevated and recurring ownership taxes are introduced or increased.
Liquidity will be key. So will the ability to refinance, restructure or sell without being forced into a decision.
COMMERCIAL OUTLOOK
There may also be opportunities in commercial property.
The government’s early decision to reduce business-rates bills by 20% for pubs, social clubs and live-music venues provides an indication of the direction of travel, with greater support for those businesses seen as contributing to local communities.
On the other hand, businesses judged not to make a positive contribution to those communities may receive less favourable tax treatment or relief.
Commercial property owners will need to think not only about the quality of their tenants but also about how those tenants’ business models may be treated by future policy.
PREPARATION, NOT PANIC
The sensible response is preparation, not panic.
Investors should review their debt levels, rental yields, refinancing dates and exposure to any future recurring taxes.
Developers should pay close attention to regional plans, public-land releases and local-authority partnerships.
Borrowers may also place more value on certainty, flexibility and liquidity, rather than simply chasing the lowest rates available.
An Andy Burnham government could create substantial opportunities in regional regeneration, affordable housing, infrastructure and public-private development.
But, it could also bring higher taxes, more intervention and greater scrutiny of property ownership.
The people who navigate this environment best will not necessarily be those who predict every policy announcement correctly.
They will be those who understand their exposure, preserve their liquidity and flexibility, and are ready to act as the details become clearer.
