A hopeful period of strength and stability didn’t turn out as planned for Theresa May. The snap election has muddied the waters, meaning some property investors may remain a tad more cautious until things settle down.
However, if speculators believe this time of political uncertainty will negatively affect the property market, one glance at the sector post-Brexit should be of comfort. In the year since the Referendum, the average property price has risen by 5.6%.
Likewise, although the Conservatives didn’t get the extended majority they were looking for, they still have mandate to govern effectively and will be able to guide the country through the EU negotiations.
Therefore, property speculators shouldn’t worry too much about the seemingly ambiguous future of UK politics. The law of supply and demand will remain, especially in the consistent rental and student sectors which are more immune to outside influence.
Many estate agents inside the industry have experienced election fallout before, as well as the 2008 economic crash and last year’s Referendum. Of course, any uncertainty is not welcomed by investors, but because the UK has a chronic housing shortage problem, the demand will always be there.
Sales director at Seven Capital, Andy Foote, echoed these sentiments in the wake of the election result:
“While the London market may be more sensitive to a change in central government, for the short term, growth markets around the country will remain robust and resilient, delivering capital growth for investors,”
“Despite the change in government, the imbalance of supply and demand in the UK property market still persists.”
Adam Challis, the head of residential research at investment management company JLL, has noted that the loss of Gavin Barwell as housing minister will have mixed results. Although some may believe this will create more ambiguity, if the new minister, Alok Sharma, can continue government house building pledges then confidence will return.
“It will be crucial that the new champions of housing market policy in government can reaffirm commitments to the current policy direction rather than to create further disruption or uncertainty,”
“It’s important the policy direction as set out in the white paper on building more homes across the range of tenures will be upheld.”
Brexit and the election both saw a drop in the pound. This has mixed results for the economy, where one positive is a rise in foreign spending. International investors will be attracted to the UK in increasing numbers due to the more favourable exchange rate.
This has been evident within the student market in particular. Over 70% of investment in the purpose-built student sector was from overseas buyers last year. The spending behaviour of accomplished and wealthy foreign buyers is a good indication of where growth will occur.
No Real Impact
Nationwide’s chief economist Robert Gardner has maintained that the results of the snap election won’t have too much impact on people’s buying and selling behaviour. Broader economic effects are the main factor, something proven by previous election trends.
As house prices remain out of reach of many traditional first-time buyers, the rental sector is expected to grow in demand as well as rental income. A typical tenant won’t really have the state of UK politics in mind when considering a move, meaning the election isn’t likely to affect the overall property market too much either way.
If you’d like further evidence that the property market is still healthy despite current politics, then you might be interested that Demand for Rented Homes is on the Up as Renting is Now Cheaper Than Buying.