UK property market sees upsurge following decisive Conservative win
On May 9th, the British electorate delivered a wholly unexpected majority to the Conservative party. Right up until the polls closed, it seemed highly unlikely that anything like a conclusive result would emerge. As the polls remained deadlocked, uncertainties intensified and concerns for the economy began to weigh on the prospects for continued economic recovery. The UK residential property market seemed particularly vulnerable to these uncertainties and in the run-up to the election, there was clear evidence of buyers holding off, to the extent that in many parts of the country, transactions almost ground to a halt.
Had the Labour party won, it would have had marked negative impact on residential property markets across the UK. Labour had concocted a range of micropolicies in direct relation to housing and residential property markets that would certainly have been disruptive to say the least. A flagship policy was the so called “Mansion Tax”, an old fashioned wealth tax that would have imposed an annual charge on all properties valued over £2 million. Most of such properties are concentrated in London and risked stalling the market on anything above £1.5 million.
Labour promised to abolish the non-dom status whereby foreigners could live in the UK and only pay tax on their UK earnings so long as they paid any tax due overseas. It was an appeal to fairness by Labour but ignored the raft of economic benefits of this wealthy cohort to the UK not least that they pay a lot of tax. The Conservatives on the other hand were seen as offering competent stewardship of the nascent economic recovery, a continuation of the long term economic plan towards deficit reduction and were regarded as business friendly and champions of enterprise.
In addition, policies related to housing were regarded as broadly
positive such as the continuation and extension of the “help to buy” scheme, an extension of the mortgage guarantee scheme to help first time buyers and the introduction of a “help to buy” ISA (individual savings account). A majority conservative government is certainly a good outcome for the residential markets in London and beyond on both a macro and micro level.
The financial markets immediately indicated their approval and have remained buoyant ever since. Immediate press comment with regard to property was positive but now nearly a month later, we can see just how much the uncertainty and concern was holding the markets back. Agents across the UK are reporting an upsurge in activity and one UK daily announced this week that asking prices are up an average of 17% since the election result.
In conclusion, the unexpectedly swift and decisive outcome of this election has done much to lift the clouds of uncertainty and unpredictability that have been a feature of the property market for the last six months. We still consider that many parts of London have reached levels where affordability will, for the time being, limit further upside.
The Conservative victory will however, provide fresh and firm impetus to the growth themes we have identified in our article last month and on which we are focusing with our investors. For neighbourhoods that are undergoing positive transformation as a result of rapid regeneration/gentrification, new infrastructure or an influx of buyers from more expensive areas, the election result could well add an additional 10-15% to growth over the next 5 years.
Paul Woodward is Managing Director of The Real Asset Boutique, a specialist in property investment and management in the UK, especially London.He can be contacted at: info@therealassetboutique.com