Alan Margolis – Head of Bridging, United Trust Bank
With less than a month to go before the 2015 General Election (and I am assuming we will just have the one this year) and already into the 2nd quarter of the year, it is worth asking what has been the impact, if any, of the forthcoming election on the Bridging market and what the impact there may be post May 7th?
Let me start by establishing that these are my personal views. I’ve not become political spokesperson for the Bank, so don’t expect everyone at UTB to share the same perspective!
It is clear that other than the Conservative Party, the three other principal parties being Labour, the Liberal Democrats and the Scottish National Party (who may well have significant influence on some of the next parliament’s legislation), are seeking to raise additional taxation through some form of property levy which has become known as the “Mansion Tax” – A wholly misleading nick-name in my view because in London at least it is well documented that many properties affected could in no way meet the dictionary definition of a ‘Mansion’ – “1. a very large, impressive, or stately residence. 2. manor house”.
Putting aside the rights and wrongs of a “Mansion Tax”, with the average value of a house in the UK being circa £270,000 and around £500,000 in London, most properties and most property transactions are, and will remain, unaffected by this tax and indeed we have seen bridging loan transactions for these properties continue much as they did last year, which was a very good year for the bridging loan sector as well as UTB.
However, at United Trust Bank we see many propositions where the value of the security property(ies) lies in the £2m ballpark, and we have anecdotal evidence that transactions involving such properties are being affected as prospective purchasers and doubtless some vendors adopt a “wait and see” approach. Increasingly, prospective customers make reference to the Mansion Tax and valuers now refer to it in valuations for properties that may be impacted. It is the prospect of a Mansion Tax that has so far been the only discernable impact of the election campaign from UTB’s Bridging department’s perspective.
With regard to the future, , the ramifications for the short term bridging sector are hard to pin down at this point. One might venture though that lenders, as an overall group, might not find a particularly sympathetic ear in a Labour led government when and if the need should arise.
Further, much of the political tide gives an impression of favouring further regulation of lending, perhaps even extending the requirement for all lenders to be FCA regulated. As a fully authorised lender undertaking a significant proportion of regulated loans, this would not impact UTB or a host of other regulated short term lenders. However, it would obviously impact on those lenders who currently remain unregulated, and it would push all short term bridging lending more into the mainstream of mortgage lending – not necessarily a bad thing.
So, notwithstanding the genuinely unpredictable nature of the outcome of possibly the most significant general election since 1979 in terms of a change of direction for the country (the only predictable outcome being the strong likelihood of a coalition or minority government), the impact to date on the bridging community has been limited to deals involving properties bordering the likely Mansion Tax value threshold.
As to the future, I expect there will be a flurry of activity in the immediate aftermath of the election whatever the result, as the psychological barrier that a general election presents to some, Mansion Tax or no Mansion tax issue is lifted and a further on, a red and orange tinted government will almost definitely see in a form of Mansion Tax, the impact of which will need to work its way through the value of borderline properties, and the bridging sector will need to keep a close eye on the possibility of further regulation of lenders and lending. It’s going to be a very interesting May.