Just before the general election we wrote a post outlining the approaches of the UK’s main political parties to property and property investment. We also predicted a comfortable win for the Conservatives, which would likely bolster the value of the pound as such a result would represent a certain amount of stability. In reality the Conservatives achieved more than a merely comfortable win, with many commentators referring to the victory as a landslide.
Before we take a look at the analysis with regard to the pound and property that has emerged since the election, lets recap what Conservative pledges affect landlords and investors.
The Conservatives on landlords and renting
Withdrawal of legislation allowing landlords to evict tenants without giving a reason. Known as Section 21, the current framework allows landlords the opportunity to end a tenancy whenever they like, if they want to reclaim possession of the property. This may be a blow to landlords, but comes as a result of pressure from renters groups who argue the current rules cause renters to feel insecure in their own homes. The withdrawal of this legislation does not prevent landlords from evicting problem tenants.
Lifetime deposits for renters. Deposits set at a fixed rate with be able to be transferred between homes, such that borrowes can put 5% down and repay the same amount over the term of the deal, meaning buyers will not be hit by spikes in interest rates. Boris Johnson himself is quoted as saying
“A Conservative majority government will empower renters and give them greater peace of mind. We will end no fault evictions, so that landlords can’t remove tenants without good reason, and introduce Lifetime Rental Deposits so renters don’t have to save up for a new deposit while their money is tied up in an old one.”
Clearly these protections are aimed at making life a bit easier and fairer for renters, but anyone engaged with UK politics will know that the Conservatives are just as likely to be protecting the market; there are after all no mentions of the kind of rent-capping measures Labour had suggested. Perhaps though, we can hope that the Government will find a happy balance between renters rights and encouraging a healthy market.
Rightmove has recently released its House Price Index, which gives a national picture of activity around housing and house prices. They predict a 2% rise in property coming to market in 2020, as the majority government offers some certainty in time for the spring moving season.
Crucially, demand is far outstripping supply. The number of sales agreed in 2019 has fallen by around 3% (surprisingly low given uncertainty over the last year), but properties coming to market has fallen by around 8%.
A final noteworthy point is the continuation of low interest rates, lenders competing to lend, high employment and wage growth, which all contribute to affordability and the likelihood of potential buyers becoming actual buyers.
You can read the full report here.
One of the Conservative party’s tritest slogans has been ‘Get Brexit Done’, and now it looks like the Government will finally be able to finish the job, without a strong opposition. The deadline remains at January 31st, which frighteningly close. The so called ‘Boris Bounce’ which saw the pound rise quickly and reach a 12 month high within the first 20 minutes of the election result is most likely to drop again before rising more steadily. As we explained in our last article the forecasts for pound sterling are healthy.
Brexit has been driving house prices down for the last 19 months, so if you’ve bought recently then you will likely have made the most of the political and economic uncertainty. Now, thanks to that much prayed for certainty, you will most likely watch the value of your property steadily rise.
All in all, things are looking good for property and property investment. Of course, we still need to sort out Brexit, and God knows what lays in wait around the corner, but the prevailing opinion is that the market will strengthen and may continue to do so for some time, perhaps not reaching a peak until 2027.