In a rising property market, the sun is always shining, and although I can’t say that transactions are not happening, there is still life out there and according to the Royal Institution of Chartered Surveyors (RICS), we may be in positive territory for the first time since October 2022.1
It’s interesting to note that throughout the Election and beyond, trading in residential property was oblivious to the change from the political livery of Blue to Red, probably because the result was a self-fulfilling prophecy on the part of the Electorate.
Summer on their superyachts
The full effects of a Labour regime are beginning to be felt though, and one does not need Tarot cards and a ‘Familiar’ to anticipate the full ramifications of the non-dom changes. Our wealthy international brethren are still soaking up the last rays of summer on their superyachts, before the ‘grand reveal’ of October 30th’s budget when their association with the UK will be determined.
Dubai, Monaco, and the Bahamas
The whispers about billionaires leaving the UK have now turned into a shout, as they shut the gilded door behind them. Much as these wealth creators like living in this wonderful country, the current political Labour regime appears to be getting increasingly hostile to them so that the attractions of Dubai, Monaco, Bahamas, and other recently created tax shelters in Europe, are beckoning.
Turn this trickle into a proverbial torrent
As far back as July 2024, wealth advisors – Henley & Partners – stated that millionaires were fleeing these shores due to our high-tax climate. The UK is expected to see an unprecedented net loss of 9,500 millionaires in 2024 – second only to China worldwide and more than double the 4,200 who left the country last year. A Labour government is going to turn this trickle into a proverbial torrent.
Talk to the wealthy Californians
Listening to their rhetoric, you would think that these non-doms cost this country money, but you’d be mistaken. We happily earn at least £6billion per annum from them, quite apart from the employment they create and the multiplying effect of their spending. These valuable foreign earnings are pocket money to the oligarchs, yet even their crumbs from the table are invaluable to the UK economy, which is looking a little threadbare at the moment.
There is even talk of an ‘Exit Tax.’ This is always the sign of a desperate government and any country that resorts to these measures really needs to look again existentially at their over-all tax regime, since incentives to invest in a country, rather than penalties to exit, are far more preferable. If you are in any doubt, talk to the wealthy Californians who want to leave their native state.
It is like an incompetent hotel manager deciding to lock the guests in their rooms when they become disgruntled and want to leave. I say, improve the service so that instead, they are knocking the door down to book more rooms in the establishment.
More doctors and nurses
As the myopia of the Labour Party blinds them with political dogma, effectively the loss to this country could be considerable and unaffordable. They talk about raising money from eliminating the non-doms to pay for more doctors and nurses but, in practice, who will fund the deficit that these foolhardy changes in the tax regime will undoubtedly create?
Whilst on the subject of self-flagellation, the changes to VAT on schools are causing consternation amongst the middle classes who cannot afford this penal tariff and by the looks of things, the State schools are totally unprepared for the avalanche of displaced students from the private sector which will be generated by this decree. Chaos reigns!
Gives us all déjà vu and reflux
Education is the wealth of the nation, and the mayhem created by previous Labour regimes by their insistence on eliminating grammar schools in favour of comprehensive ones, will give us all déjà vu and reflux at the same time. When governments interfere with these important matters, invariably they end up with a far worse result. They will not earn a penny from these changes but if they do have spare cash from other sources, why not put the investment into State schools so there isn’t such a yawning difference between these and the private sector.
Depriving pensioners, who have paid into the system for years, of their winter fuel payment, has been an unmitigated disaster for the government, demonstrated by the number of rebels in the recent vote. Let’s see if this mendacious legislation makes it to the Finance Act without amendment.
Methinks, that because the ‘grey’ vote normally favours the Tories, they have nothing to lose by this inanity.
Sugar daddy payments for Kier’s spectacles and Vicky’s dresses
When you take into consideration the billions consumed in the pay settlements of the rail workers and the doctors, that are well above inflation, Starmer and Reeves are looking less like the ‘Dynamic Duo’ and more like ‘Team Laurel and Hardy’ and this is before we even mention about cronyism and the unregistered ‘sugar daddy payments’ for Keir’s spectacles and Vicky’s dresses. Poor lambs.
The Budget on October 30th will be a watershed moment, threatening to send shockwaves through every stratum of the property market. Although the Labour manifesto excludes changes to the main sources of taxes in this electoral cycle, it leaves the Chancellor only the following; Capital Gains Tax, Inheritance Tax, Private Pensions, Mansion Tax, Council Tax, Wealth Tax, Development Land Tax and rent reforms, to play with.
She is on course for an ideological collision with the middle and upper classes, who were already feeling the pressure of previous tax-and-spend Tory governments.
Labour’s modus operandi is to spend like a drunkard when it comes to the unions and public sector, thus guaranteeing a bought-and-paid-for voter base.
Reevenomic theory tells us
The ‘marzipan layer’ of middle and upper classes will be squeezed until they can barely breathe. In Labour’s calculations, they vote Conservative anyway, so they’re expendable. Reevenomic theory tells us that there was a ‘black hole’ in the country’s finances when Labour took power, even though interest rates and inflation are coming down, and employment and growth are rising, as we speak. A Tory legacy for them.
There is good news on interest rates. On 1 August the Old Lady of Threadneedle Street delivered, going from 5.25% to 5%. Lending institutions caught the wave and there are some attractive long-term fixed-rate offers priced from 4.08%, while the best three- and five-year deals at 4.14% and 3.81% respectively, which will console property owners in the residential market in the £1–3 million brackets.
Two years ago, the markets were absolutely buzzing, and that sparkle has now fizzled away – there are fewer buyers around, particularly those without a chain. The key factor in determining this trajectory is the supply of new properties coming on to the market in relation to the overall demand. If this remains in kilter (as it is at present) then values will do the tango sideways.
The main difference in the current markets is enhanced price sensitivity. If the asking prices exceed underlying value by more than 5%, your property will languish on the shelf and collect dust for many years.
The main drama is now in the rental market. Years of tinkering by well-meaning but short-sighted Chancellors means that some landlords are selling their buy-to-let investments, not just because of the adverse changes in the tax arrangements introduced by the last government, but for fear that the next Budget will give more rights to tenants, even if they don’t pay their rent.
Hellish tenants
While there are some ‘dodgy landlords’ there are also ‘hellish’ tenants, who ‘know their rights’ but strangely, in some cases, ignore their responsibility to pay rent but still want occupation.
As long as governments and councils rely mainly on Housing Associations to build affordable housing, they need to encourage (not discourage) the partnership with private landlords who, let’s face it, provide most of the rental supply in the UK. Lest we forget, the less properties available, the higher the values and the more disenfranchised the vulnerable renters will be.
By contrast, the dizzy heights of the uber-rental market are ablaze with activity. This is a speciality for Glentree, and we are achieving stratospheric levels of business with those fortunate enough to rent at levels up to £50,000 per week. Luckily, we have a range of incredible properties that justify this astonishing rate.
Clutches of HMRC
At the heart of all this is a government determined to mess with the markets whilst ignoring our favourite law of ‘unintended consequences.’
By renting rather than buying, tenants who are already ‘wadded to the hilt’ ensure that a hefty 20% is kept away from the clutches of HMRC, which would otherwise be owed in the malign Stamp Duty payments etc. This gives the tenants four to five years rent free, courtesy of His Majesty’s government. They know full well that the landlords are obliged to pay for the amenities of the property and such tenants enjoy these super-luxury mansions and apartments to the fullest extent, safe in the knowledge that their real wealth is far away from the clutches of the Chancellor in one or other of the tax havens.
Swerved to the left
I was hoping for nu-Labour grandees, Tony Blair and Peter Mandelson, ‘having a word’ in Starmer’s ‘shell-like’, and steering him towards the political center. Instead, our great leader appears to have swerved to the left, possibly ambushed by the left-wing factions in his party (did I mention Angela Rayner’s name?) looking to exert retribution against the middle/upper middle classes who, historically, have not voted for them.
Crossing the road to slip on a banana skin
The honeymoon period for the government has been abruptly brought to an end in an untimely fashion and it does look, at the moment, like the High Command ‘is crossing the road, to slip on a banana skin!’ Oh dear!