The shock result of the UK’s snap general election is difficult to overstate but the housing market has – so far – reacted calmly with few experts forecasting significant change to the sales or rental sectors.
To summarise an election of high drama, the Conservatives remain in government, but as a result of losing their overall majority in the House of Commons they now rely on a small regional party – the socially-conservative Democratic Unionists – to ensure legislation can be passed in future.
On many fundamental issues underpinning the UK housing market, such as supporting Brexit and being broadly supportive of free market economics, the Conservatives and Democratic Unionists are in line with each other and have long-standing links.
Therefore despite the potential political volatility that goes with minority government, the ‘mood music’ for the UK housing market has not changed significantly.
For example, the immediate-term drop in the value of Sterling was relatively minor – around two per cent on the day after the election. Many analysts believe this accentuates the attractiveness of London property to overseas buyers who see better value purchases.
In addition, the FTSE 100 – a strong stock market barometer of international sentiment about the UK – actually rose by more than one per cent on the day after the election.
Prime Minister Theresa May has confirmed that Brexit talks will be held with the EU as scheduled later this month, and the key government ministerial positions regarding Brexit and the economy are unchanged.
Therefore in the immediate term many estate agents and residential industry analysts suggest its ‘business as usual’ for London’s sales and rental markets. The respected Royal Institution of Chartered Surveyors has said it sees the election fall-out as leaving the housing market unchanged in the immediate future.
The longer term future for the government and policies affecting the market are more difficult to predict.
In theory, a minority government could fall at short notice, triggering a new election. However, it is not unreasonable to suggest that the Conservatives and Democratic Unionists will be heavily preoccupied with Brexit in the immediate future and will be unlikely to risk any conflict which may lead to yet another poll which would destabilise the process and the markets.
Some of the new administration’s proposals regarding specific elements of the housing industry, contained in its election manifesto, may have a low priority in this new context.
These proposals include a ban on letting agents’ fees levied on private rental tenants, a general desire to see longer-term private tenancies, and a broad commitment to streamline the house sales process.
With the political focus on Brexit, these policies are unlikely to be enacted immediately. There will be a new housing minister – yet to be named – and it will take some months for him or her to become acquainted with the issues. Few expect many of these policies to feature in the first year’s business of the new government.
Against this political landscape, it is important to remember the fundamental characteristics of London’s housing market remain utterly unchanged.
For example, there is still a significant shortage of homes compared with demand and for that reason housing affordability for many Londoners remains very challenging. Therefore the predicted growth in London’s private rental sector remains strong and provides one of the most compelling justifications for investing in the UK capital’s housing market.
Management consultancy PwC forecasts that by 2025 – just eight years from now – London will become a city of renters, with just 40 per cent of households owning their own homes.
PwC says two thirds of those households renting will be reliant on private sector investors to provide homes. So while short term political uncertainty has undoubtedly increased as a result of the shock general election result, this has so far had little impact on the housing market. In the longer term, the capital remains strongly attractive to investors.
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