With a 365 seat majority, what can property investors expect from the Conservative Party Government?
Since the results of the referendum in 2016, property investors have reacted with caution, as the uncertainty of the country’s future outside the EU has made it equally unclear how the investment market will perform.
Both housing supply and demand have been stifled by the ongoing lack of clarity, with former Prime Minister Theresa May failing in her bid to secure a majority to see her Brexit deal through Parliament. This has seen the UK’s departure date set back numerous times, leading to a backlog of pent-up demand from would-be buyers, tenants, and investors alike.
Finally, after more than three years of questions, the property investment industry looks to finally have its answers, as Boris Johnson has secured his mandate to end the uncertainty once and for all.
With a comfortable majority totalling 365 seats, the Conservative Party has cemented itself again in Government, making it all but certain than the Withdrawal Agreement between the UK and the EU will be passed through Parliament, with suggestions that the Bill’s first reading could occur as soon as next Friday the 20th.
This puts the UK in line with its targeted exit date of January the 31st, 2020, giving the country and investors a definitive resolution to the last three years of uncertainty. But what does this mean for the housing market moving forwards?
In the short-term, the January deadline – which is now very unlikely to be extended – will create some urgency amongst buyers and sellers who have otherwise been reluctant to commit to any major decisions. This would lead to a significant boost to both supply and demand, creating plenty of movement in the investment market as investors act swiftly to acquire the best buy-to-let properties.
But, with some uncertainty remaining from the fact that the UK will need to negotiate and secure a trade agreement with the EU, property price growth is still expected to be moderate, if only throughout 2020.
This is according to real estate services firm Savills which, in their November residential market forecasts, predicted that house prices across the UK will only rise by 1% next year whilst rents will see slightly higher growth of 2%.
After 2020, however, is when the market is expected to see its more significant gains, with Savills’ forecasting that by 2024 property prices will have increased by a cumulative 15.3% and rents by 15.4%.
And just like the Conservative Party’s performance there, the North of England is also predicted to see the biggest gains in prices over the next 5 years, with growth of 24% in the North West, 21.6% in Yorkshire & the Humber, and 19.9% in the North East.
Whilst forecasts are always meant to be taken with a pinch of salt, one of the key caveats in Savills’ predictions is an orderly Brexit, which all signs currently point towards.
But it isn’t just prices. The sterling saw an exceptional recovery in the aftermath of the result, rising to a three-and-a-half-year high against the euro of €1.20 and $1.34 against the dollar, whilst the FTSE 100 and FTSE 250 share indices both saw gains of 1.8% and 4% respectively.
With progress throughout the trade negotiations finishing off the last of the political and economic uncertainty, the pound finally looks to be shrugging off its recent weaknesses compared to other currencies. This gives non-UK investors a limited window to commit to purchases and still secure a favourable exchange rate whilst they can.
This is doubly the case if the Conservative Party does fulfil one of its key manifesto pledges to introduce a further stamp duty surcharge on overseas investors buying property in the UK, which has been suggested to be in the region of 3%.
There are of course other policies for the housing market to consider which were revealed by Boris Johnson at the end of November and which could have a notable impact on the industry in the future.
This includes his commitment to maintaining the previous Government’s pledge to build 300,000 new homes every year, resulting in at least 1 million more properties for sale and rent during their term in Parliament.
In addition, his Government will look to simplify the planning system and support modern construction methods, which have both been high on the agenda of many of the UK’s biggest house builders for several years.
Doing so would deliver a boost of confidence for property developers which is already being seen, with many construction firms seeing exceptional rallies in their share prices on the back of the election results. This would translate to a surge in new property supply which will give investors even more investment opportunities in the future.
For now, however, all eyes will be on January, where the Prime Minister will inevitably use his significant majority in Parliament to deliver on his promise to “get Brexit done”, bringing about an end to the political uncertainty and unleashing new global investments into the UK’s vibrant property market.