Updated on 25th July 2024.
Labour wins in a landslide in the UK general election – Keir Starmer is the new Prime Minister.
“Change begins now,” Starmer says; Rishi Sunak says Britain has delivered a “sobering verdict.” Now that Labour has passed the key 326 Westminster seats needed to run the country – and outgoing Prime Minister Rishi Sunak has conceded defeat – what can we expect? Mark Richardson of BB&J Commercial gives his views on Labour’s key pledges.
Labour’s Promises and Their Impact on Commercial Property
Reforming the Planning System
One of the key pledges from the Labour party is to reform the planning system and reinstate local targets to help build 1.5 million new homes over five years. This reform could streamline planning permissions, which may open up more opportunities for commercial property developments. However, such extensive development targets may also put pressure on existing infrastructure and resources, potentially leading to logistical challenges for commercial projects.
BB&J Verdict: “Reform of the planning system is long overdue. The current system is sluggish, cumbersome, and often confrontational, which creates a significant blockage in bringing sites to market. This is one of the biggest complaints I hear from developers. While reform is an easy promise to make, delivering it will be challenging, especially given the lack of resources in the planning system.”
Brownfield Site Development
Starmer’s commitment to fast-track the approval of brownfield sites and release some “low quality” green belt land for housing can lead to increased demand for commercial spaces around these new developments. This could benefit both investors and developers in the commercial property market. Conversely, this policy might face resistance from environmental groups and local communities, possibly leading to delays and increased costs.
BB&J Verdict: “The integration of commercial services, such as local centres and shops, around residential schemes is a well-established practice, as the two naturally compliment each other. However, it will be intriguing to see how the government plans to fast-track brownfield sites. The clean-up, remediation costs, and necessary investigations on old industrial land make development more costly and time-consuming. Moreover, defining ‘low quality’ greenbelt will be another challenge. While it sounds promising, it strikes me as a soundbite that may be difficult to execute in practical terms.”
Focus on Social Rented Homes
The emphasis on building social rented homes and giving first-time buyers the chance to buy homes in new developments before investors could initially slow down some investment opportunities. However, it can lead to more stable communities, indirectly benefiting commercial property in those areas by creating a reliable customer base for local businesses. The trade-off here might be a potential decrease in short-term profits for investors focussed on quick returns.
BB&J Verdict: “While the need for more housing is undeniable, it is not a quick fix. I do not see any immediate benefits for the commercial sector. However, once these developments are built, they will naturally generate demand for local services such as shops, schools, and leisure facilities.”
Mortgage Guarantee Scheme
The introduction of a permanent mortgage guarantee scheme to help first-time buyers can increase home ownership, potentially leading to a greater demand for retail and office spaces as new homeowners establish themselves. On the flip side, this could lead to an overheated property market, driving up prices and making it harder for new entrants, both residential and commercial, to afford prime locations.
BB&J Verdict: “A mortgage guarantee scheme could incentivise lenders to relax their criteria for first-time buyers. Introducing more buyers into the housing market at the entry-level should create a positive knock-on effect, stimulating not only the housing market but also the wider construction sector and economy. This could be a very positive step forward.”
Leaseholder Reforms
Labour’s plans to make it easier and cheaper for leaseholders to extend leases and ban new leasehold flats will tackle unregulated ground rent charges, providing more security to investors and possibly stabilising the commercial property market. However, these reforms might face legal challenges from current leaseholders and freeholders, potentially creating a period of uncertainty in the market.
BB&J Verdict: “Leasehold reform is a hot topic, and for good reason. Many people have been caught off guard by ground rent issues, which can render individual properties both unmortgageable and unsellable. While this issue clearly needs addressing, its wider impact on the market may be limited.”
Empowering Renters
Banning no-fault evictions and empowering renters to challenge rent rises might create a more stable rental market. This can positively affect commercial landlords by providing more predictable rental income streams. Nonetheless, stricter rental regulations might deter some landlords from investing in the rental market, possibly reducing the availability of rental properties.
BB&J Verdict: “While it is undeniable that some unscrupulous landlords exist, this policy seems to generalise, assuming all landlords operate in this way, which is certainly not the case. In both the commercial and residential sectors, there are good and bad landlords and tenants. From my experience, landlords who maintain their properties tend to attract better-quality tenants, creating a win-win situation. Rent levels are rising due to demand for accommodation, and increasing supply seems a better solution than additional regulation.”
Expectations and Uncertainties
Prime Minister Keir Starmer and Chancellor Rachel Reeves, along with the new government, will face significant challenges such as the cost of living, government finances, and a complex global environment. While their policies aim to create positive changes, the impact on the commercial property sector will unfold as these policies are implemented.
Mark Richardson, Partner at BB&J Commercial said, “The new Labour Government faces the same challenges that the Conservative Government did yesterday, so, in that regard, there is no change. One of the few recent positives has been declining inflation and the potential for falling interest rates. This could be seen as an early ‘win’ for Starmer as PM. Hopefully, short-term policies will remain on track to ensure some degree of economic stability.”
As the new Labour government begins to address these issues, BB&J Commercial will continue to monitor and adapt to the changing landscape, ensuring our clients are well-informed and well-positioned to navigate the evolving market.
Conclusion
The Labour victory marks a significant shift in the UK’s political landscape. While there are many promises on the table, the actual impact on the commercial property industry will depend on how these policies are executed. At BB&J Commercial, we are committed to helping our clients understand and capitalise on these changes. Stay tuned for more updates as we delve deeper into the implications of this political shift.
For more information or to discuss your commercial property needs, contact us today.
