You get the sense that – however long the Boris Johnson Premiership might last (and I’m of course making a number of assumptions here) – it might be both short-lived and rather radical in terms of its policy decisions.
Perhaps those involved might feel they are on borrowed time, particularly if a ‘No Deal’ Brexit looks increasingly likely and you have a number of Conservative MPs willing to bring down their own government in order to avoid it. The political machinations over the next four to five months will be absolutely fascinating because of the level of uncertainty involved.
Indeed, we could have a number of rare occurrences playing themselves out here – an attempt to prorogue Parliament; the aforementioned loss of a vote of no confidence; a sitting Prime Minister losing their constituency seat; a coalition government held together by Remain-backing parties; or alternatively a coalition government which is reliant on the Brexit Party for its survival. All seem likely which might mean that Johnson feels he needs to be a man in a hurry.
The rumour mill is working overdrive at present with the belief in Westminster that Sajid Javid will be the next Chancellor, and that we’ll get a very early Budget setting out Johnson’s economic policies. Some of them have already received much attention, not least a decision to cut taxes for the highest earners, and of specific interest to our market, a stamp duty cut to nil for those purchasing properties under £500k.
And we might expect some further radical measures to be announced especially if Johnson/Javid feel they need to sweeten the economy in the face of a No Deal Brexit – presuming of course that Parliament doesn’t stop this, or it isn’t shut down to get the policy through. If we think trust in democracy is at a low right now, one wonders where it might be should the PM/government of the day feel the only way to secure Brexit is to stop Parliament from sitting. We live in rather crazy days.
However, back to the housing market, and from my perspective, there appears to be no doubt that Johnson, in particular, is willing to stoke some considerable fires in order to give the market a bounce. This proposed cut to stamp duty is not a tinkering around the edges as we have seen with previous governments, but a fundamental and wholesale change that is likely to give a considerable boost to the purchase market.
I’ve talked before about the significant costs of moving, of which stamp duty is a primary one, and by taking away this burden you clearly make it easier for people to move. Whether they would wish to do so in a period of great uncertainty is up for debate, although I suspect that many might view this as a limited offer, and we are all acutely aware that stamp duty ‘offers’ tend to be snapped up in significant numbers. I’m thinking specifically of the period prior to the increase in stamp duty for the purchase of additional properties when we saw a considerable spike in purchasing as landlords sought to purchase before they became subject to the 3% increase.
In that sense, the market might well brace itself for a short, sharp burst of activity, and were this stamp duty proposal be coupled, say, with measures to allow first-time buyers to access their pensions to fund their deposit, this might give a boost to the number of first-time purchasers getting on the ladder. Although this latter measure has clearly received a mixed response, given concern about such action causing problems further down the line if the pension pots are not enough to sustain individuals through retirement.
Finally, might we also see some radical policies put in place to boost the number of homes being built, specifically around green-belt activity and perhaps a decision to extend the life of Help to Buy indefinitely. That would not only appeal to developers/housebuilders but could, coupled with greater use of high LTV mortgages, ensure that the next generation of purchasers get into their homes sooner rather than later.
In terms of a Johnson Premiership, housing might be deemed an ‘easy win’ to deliver quickly and with little opposition to overturn it, and there could be considerable benefits to such action. The question is just how long those measures might be retained and whether the bigger issues confronting the next PM will ultimately do for him, as they have done for so many others.
Pad Bamford is business development director at AmTrust Mortgage & Credit