The industry reacts to Rachel Reeves’ first speech as Chancellor and Labour’s opening weeks

The dust has settled on the election. We’ve had time to step back and examine what a Labour government will mean for the property market and wider economy. The party itself has also had time to break down exactly what it wants to prioritise.

Rachel Reeves, in her first speech as Chancellor[1], detailed[2]:

• Planning decisions for major infrastructure projects in Britain will be made nationally rather than locally in an attempt to stop important projects becoming tied up in years of red tape
• Green belt boundaries will be reviewed to prioritise brownfield and so-called “grey belt” land, which are poor-quality areas in the green belt such as disused car parks or areas of wasteland
• The transport and energy secretaries will prioritise decisions on infrastructure projects that have been “sitting unresolved for far too long”
• Additional planning officers will be recruited to speed up the planning process
• The former governor of the Bank of England, Mark Carney, has completed a report on the establishment of a new National Wealth Fund and Labour will announce next steps soon

Much to take in. Much more awaits us.

Zahira Fayyaz, our very own regional sales manager, shared her tempered thoughts on what Labour’s win could have in store.

“I’m willing to bet that much of what was assured from Labour in the run up to the election will end up watered down, tweaked, or abandoned entirely,” she said.

“But we have a starting point. We know roughly what the state wants to achieve. Let’s get some of the painful bits out the way first.

“First-time buyers, if they’re not careful, may be hit by stamp duty from next year. Current exemptions are set to be rolled back from April 2025, while non-UK residents may see their stamp duty rates hiked.

“Landlords may also face a tougher market going forward. Again, we’ll have to see how all this plays out, but labour has vowed to abolish section 21 evictions, overhaul private rented sector regulation, and prevent the exploitation of private renters.”

As Zahira alluded to, it’s unclear how the challenging aspects of Labour’s plans will play out. And on the other hand, there are also reasons to be hopeful.

“There’s still plenty I haven’t touched on, but I think we get an idea of Labour’s priorities here. But, putting aside how all this will be funded or what will realistically be rolled out – certain positives can be gleamed.

“No matter who you ask, everyone agrees we need more housing. Doing it right is the tricky part, but Labour plans to have 1.5 million homes built over the next five years. If (a big if) this comes to pass, it could present many opportunities for investors.

“Funding for home improvements, brownfield and grey belt development, minimum local authority housing targets – there is plenty to view with optimism. After all, we won’t get far without a can-do attitude.”

Indeed, Labour’s plans have been viewed with cautious, or hopeful optimism by those we reached out to for this update. But, at the same time, a healthy level of scepticism looms.

“Is this the most daunting job in history?”

Few will likely be envious of Ms. Reeves. The challenges she’s inherited are unprecedented. Housing has become one of the most contentious issues in the UK, and there are no obvious or easy solutions to be found.

Still, Hannah Duncan, a freelance writer and journalist who regularly covers the property market, expressed a feeling of ease following the Chancellor’s first major speech.

“The comments come as a huge relief, especially for would-be first-time buyers desperate to get off the slippery and expensive rental market,” she said.

“Reeves’ determination to build green homes is well overdue in government. Now the question is HOW green? Meek measures like A – C energy efficiency ratings will not be enough to adapt or mitigate against the flood-heavy and heat intensive climate crisis already hitting the UK.

“What’s needed is true innovation, bravery and vision.”

Ms Duncan expressed doubt on whether Labour is up to the task here. The question of how our new government will follow through on its promises is also a lingering concern.

“Promising more homes is great, but only if people have the means to purchase them,” she continued.

“With the mortgage market still buckling under the weight of Truss’ disastrous mini-budget, Reeves must also work with the Bank of England to find workarounds for the high interest rates holding buyers back.

“It will be interesting to see how many of these new homes end up in the hands of ex-renters, councils and private landlords. Managing this distribution is core to rebalancing the wealth gap. Is this the most daunting job in history? Tasked with fixing a post-pandemic, post-Brexit, post-Tory stagflating British economy is a tall order.”

Nevertheless, she shared that, in her first month at least, Ms Reeves seemed to be “rising to the task well” and is tackling the right action points.

“But whether she will be able to execute them in practice – without cutting corners, running out of money, spooking markets or compromising her principles – will show the true mettle of this new Chancellor. I wish her luck!”

Michael Street, founding partner of the mortgage brokerage Word On The Street, also shared a sense of hopefulness, and even perhaps admiration for the Chancellor. The economy may be in capable hands. The worry though, is that these hands may be at risk of dropping the ball over the coming months.

“Rachel Reeves, from the outset, seems to be a Chancellor for once, with some knowledge and understanding of what she is talking about, and is instructed to do,” he said.

“Having studied Economics at Oxford and being in role as an economist at the Bank of England the thought of Rachel running the Chancellor’s office should fill us with confidence that things will get better.

“Ultimately, we just don’t know if personal & party politics will over power common sense.”

For brokers, Mr Street shares that rental reform plans, house building targets, and planning reforms are worth keeping an eye on going forward. Achieving all this won’t be easy.

“The new Chancellor has promised to deliver 1.5 million new homes in the next 5 years. To put that into context, we have to build 300,000 new homes every year for the next 5 year and the last time we achieved this was never.

“The most consistent we have been in this regard is during the 1970s where the UK produced on average 260,000 homes per year. No successive Government has achieved national house building targets since.

“However, given Reeves commitment to overhauling and simplifying the planning process, there is light at the end of the tunnel.”

Indeed, Ms Reeves has “started well”, which fills the Word On The Street team with confidence. But it’s still too early to let our guard down.

“We will not see how well until we are 12 months into this new Labour government’s term, which is when most of the initial pledges should start to take shape and initial results are forthcoming.”

Getting ahead of ourselves here may prove risky. We have and destination, it’s just not clear how we’ll get there yet. A key point that cannot be forgotten or swept aside.

“The devil will be in the detail”

Kelly Hopkins, founder of the property investor members club Let’s NVST, also welcomed the Chancellor’s plans, but warned the state will not be able to achieve its goals alone.

“Given the significant shortage of housing, plans to reinstate compulsory housebuilding targets are welcomed, although it will be interesting to see the more detailed plan on how it’s going to be achieved,” she said.

“One certainty is that the new government will need the private rental sector onboard if they want to achieve anywhere near their plans to build 1.5 million homes.”

Ms Hopkins noted that strong sounding rhetoric around planning improvements will always be positively received. But, with a new government in place, there is a need for clarity over political posturing. This is especially true with concerns such as the abolishment of section 21.

“The initial signs of a return to political and economic stability are a strong signal for both large domestic and overseas investors, but for the government to keep the private rental sector on side, the devil will be in the detail.”

Steve Bench, a professional property investor with nearly 20 years’ worth of experience in the sector, shared similar thoughts.

“My main concern with Labour is how will they lift up the private rented sector,” he said.

“As an ex-broker and investor, I’ve seen record numbers of tenants applying for houses, record high rents, record people on council lists not liking their options – all because landlords have been selling up in a tougher market.”

Mr Bench believes the challenges landlords are facing, at least some of them, are the result of section 24 changes. A controversial piece of legislation, section 24 eventually removed BTL mortgage tax relief from the market, disincentivising investment in the process. What’s more the impact of section 24 is particularly severe now compared to when the changes were first rolled out, given how high interest rates have risen since then.

“Labour claim to care about the rented sector, so it will be interesting to see if they correct that and put section 24 into reverse,” he added.

“My concern is that Labour will be looking for a quick hit, one which may hurt landlords and renters, just to fill their coffers.”

Another area of concern for Mr Bench is the state’s focus on EPC certificates. He fears there aren’t enough trained professionals or resources to bring our stock up to code. Eventually, if this isn’t addressed, house prices could plummet, landlords may abandon the market, and council housing stocks may come under even more pressure.

“So yeah, I’m concerned about what extra measures they’re going to put in place in the private rented sector, and if they’re going to review and remedy what’s already in place that is not working.

“Labour got a lot of renter votes, they promised renters lives would get better. Well if they don’t make it better, I think they’ll have a lot to answer for.”

Evidently, there’s much to figure out and brace for. Regardless of what’s on the horizon however, we will continue to provide our borrowers with tailored, flexible, and secured financial solutions.