Business As Usual: The ramifications of the UK General Election
The property industry breathed a collective sigh of relief waking up on the 8th May as it became clear the Conservatives were the victors of the UK general election, paving the way for a majority Tory government. Sterling and the stock markets rocketed, whilst fears of Ed Miliband’s so called ‘mansion tax’ and his intended change to non-domicile tax status evaporated into the ether along with his leadership of the Labour Party.
So, what does the new Conservative government mean for the industry? The results certainly produced a wave of optimism with agents predicting renewed growth in the industry, on average around a 5-6% growth in prices over the next year, with some as high as 10% over the next few weeks. Suffice to say, the results have set the foundations for a stable and sustained growth for residential properties, particularly in regional cities and the South East.
Buyers will be faced with more choice as developers and individual sellers who adopted a wait-and-see approach before the election will now release their properties on to the market, especially in light of this week’s reports of a run of international investors speculating in the London market post election. We urge investors to exercise the usual caution when buying – the stalwart tenets of location, quality and provider being ever more important with a surge of stock on the UK market.
UK developers received a boon on the government’s commitment to building new homes, although details on the manifesto promises of more garden cities and the provision of more affordable housing are yet to be padded out.
There are, however, some potential potholes ahead, notably the promised referendum on EU membership that may prove a break to steeper market growth, despite the fact that very few actually foresee an exit from Europe. But overall, the general ethos seems to be a return to business as usual. Watch this space for further policy announcements.
What the experts say:
“With such a slim majority it almost feels like we’re ‘back to the 90s’ but the overall economic outlook remains favourable. Strong employment, low inflation, low interest rates and high levels of inward investment all bode well for the property sector.”
Miles Gibson, CBRE head of UK research
“It is in prime markets outside London where we expect to see the greatest value increase. Improvements in the London market are likely to be sufficient to trigger a renewed ripple effect into the markets beyond the capital, as those relocating from London find it easier to sell their existing home and take advantage of the price differentials with the rest of the country. Given where London prices sit relative to the rest of the country we would expect the biggest growth to be outside of the capital, with the strongest medium term prospects in the remainder of the south of the country given the expected pattern of economic growth.”
Lucian Cook, Savills UK head of residential research
“The results are a very bullish outcome for London real estate markets at all price levels. Over the next 12 months we expect residential assets above £2m to rally by up to 20% and over the next five years capital values in prime London could double. Crucially we think there is likely to be a 10-year cross party consensus – as there was between 1997-2008 – that seeks to encourage wealth creation, foreign inward investment, tight public spending and lower taxes. This will keep UK monetary policy loose and be a big green light for overseas investors to choose the UK in general, and UK real estate assets in particular, and to be able to do so with a 10-year horizon.”
Ed Mead, Douglas & Gordon executive director