Forget David Laws - Coalition's Real Problem Is Property

The coalition may be in trouble over property, and I don’t just mean the distinctly ‘old politics’ scandal over millionaire David Laws’ claims to pay his accommodation.

While there appears genuine widespread goodwill for the coalition and an undoubted feeling it has made a ‘good start’ – the Laws scandal apart – there appears growing unease over three property-related policies.

Firstly there is Capital Gains Tax – we’re familiar with all the arguments. Hometrack says the CGT hike now represents “the greatest threat” to the housing market while the latest estate agency to wade in, Scottish chain Rettie & Co, quaintly says “there have been significant concerns raised across the property owning classes” caused by the uncertainty and, as some see it, the threat of a 40% or 50% upper CGT rate.

We will not know what the government will actually do until June 22. That’s three weeks of uncertainty or, as we used to say of the ‘old politics’, plain dithering.

Secondly there is the glut of new homes on sale as a result of the end of the election period and the demise of HIPs. Countrywide says 34% more have been registered; Rightmove says 35% across the UK – including an extraordinary 66% rise in Wales.

Is this going to help the market when property price recovery, outside of London and the south east, is still relatively fragile? If it does not, and prices drop as a result, the Con/LibDem triumphalism over the end of HIPs may yet come back to haunt them.

Thirdly there is the simmering row between the house building industry and the coalition over the latter’s ‘localism’ agenda.

A letter by new Communities Secretary Eric Pickles last week, released in ‘old politics’ style just before everyone knocked off for the long weekend, confirmed the coalition’s policy of abolishing Labour’s top-down bureaucratic housing targets.

Developers and housing consultants have long criticised the loss of targets - they spoke out against the Conservative Party’s ‘localism’ agenda in mid-2009 – and over the weekend the Home Builders Federation continued its campaign of opposition.

Now of course many of these new policies were openly advocated by one or other of the ruling parties during the election, so opponents now can be accused of failing to accept the realpolitik of coalition government. We are getting what we voted for.

But presumably very few voted for CGT rises to be applied to the odd buy to let used by someone as a pension in later life. I doubt politicians raised falling house prices as a possible consequence of getting rid of HIPs. And will first time buyers unable to find a home when NIMBYs refuse to support development, say ‘hurrah’ for the coalition?

All the current fuss on these issues may be lost in the noise of future spending cuts, in which case the coalition will continue with its honeymoon.

Or what just might happen is that these arguments may combine to ensure that the subject of property, largely ignored during the election itself, will become the first big headache for the coalition rulers.

Wouldn’t that be ironic?

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