Thursday was not a good night for Theresa May and the Tories, as the the Prime Minister followed her predecessor David Cameron in coming out frowning from an unnecessary national vote.
While the Conservatives are still the largest party in the House of Commons, they have lost their overall majority – meaning either a tricky minority government or a tricky coalition (probably with Northern Ireland’s DUP). Calls for Mrs May’s resignation immediately swirled from both within and without party ranks (but have so far been swatted away by the PM), and the likelihood of Brexit negotiations getting meaningfully underway on schedule (19th June) are now slim, with a bruised mandate for a hard Brexit position.
- The final count: Kensington goes to Labour for the first time – by just 20 votes
- Housing Minister loses his seat in ‘a significant blow’ for the sector
Flying in the face of ambitions for a “strong and stable” government, this General Election result will inevitably cause more unwelcome uncertainty in the property market, as well as in the wider economic and political landscape.
So what does the UK’s property industry think? We’ve canvassed opinion from the top brass at the top end of the industry, from estate agents and buying agents to developers, investors and research heads…
Political uncertainty will continue to influence housing market performance
Liam Bailey, Global Head of Research, Knight Frank
“The lack of an outright majority, for either major party, in yesterday’s UK general election means political uncertainty will continue to influence housing market performance.
“The market will, of course, also be impacted by both future Brexit negotiations and the wider economic outlook. Our central view is that despite renewed political uncertainty in the UK recent trends will largely continue, at least for the remainder of this year.
“Prime markets, especially in London, have been experiencing a tentative improvement in sales activity, from the very low levels hit in mid-2016, while price growth remains subdued. Both trends seem likely to remain in place. Mainstream sales markets will continue to see price growth squeezed by affordability limits and funding restrictions – although government support should help new-build sales volumes.
“Amid the on-going undersupply of homes in London, the slowdown in new-build starts over the last 12 months suggests that completions may start to dip in two years’ time. In contrast, across the UK, new-build volumes will be likely to remain at current levels – due in part to the Help to Buy scheme run by the Government.
“The outcome of the Housing White Paper, which was planned for release in the Autumn Budget, will potentially be delayed. The general pro-development policy bias is however likely to remain in place.
“The housing market as a whole will be likely to continue to be supported by ultra-low interest rates, despite the risk of higher inflation due to the weak pound, which should remain a fixture through 2017. The weak pound itself should provide some stimulus for the London market in the form of overseas inward investment.”
Not in the least bit surprising
Gary Hersham, Founding Partner, Beauchamp Estates
“The result of the election is not in the least bit surprising: who would have not imagined that the Brexiteers would not have voted for Corbyn? I always predicted a Labour Government, but a hung parliament was also on the cards.
“The result means a stalemate in property for as long as two years and while I would not expect a further election this year, there may well be a change in Prime Minister by the end of the year.”
Disappointing, but the London property market will find its feet
James Bailey, Chief Executive of Henry & James
“It was the snap general election that no one expected and few could have predicted the outcome. But in less than two months of campaigning, Britain has a hung parliament.
“There were times when it looked as if the Conservative’s number of seats would be greater, but the Labour party has fought back in the 2017 general election. Many people who voted for the Conservatives in the EU Referendum, have now voted Labour.
“Today’s election result was disappointing, but the London property market will find its feet. It always does. We will need clear leadership when the new government is formed, to lead the country forward.
“Many buyers have been holding back over the past two years with the uncertainty in the market. However, we have seen a return in confidence this spring with a surge in enquiries from both the UK and overseas. We expect this trend to continue over the summer months. Both buyers and sellers know that August usually marks a traditional lull in activity, so they will be keen to make their moves before the summer holidays.
“Whether Theresa May remains in 10 Downing Street is yet to be seen, but an important piece of the political jigsaw puzzle will be slotted into place – and will remain in place for the next five years.”
Gavin Barwell losing his seat is a significant blow for housing
Stephanie McMahon, Head of Research at Strutt & Parker
“Today’s General Election result has clearly not given us the position of clarity that we had hoped for. Once again the democratic process has revealed a divided nation who have made it clear that they aren’t happy with the current situation. The impressive results for Labour indicate that the electorate have not bought into Theresa May’s plans for a hard Brexit. We must now enter into a spirit of compromise and it is possible that Brexit negotiations will become more transparent as a result. It is vital that we build a strong government in order to give us the best possible chance in negotiations with Brussels over the next two years. However, it looks possible that we will now face a Conservative leadership contest and another General Election soon.
“When the General Election was called seven weeks ago it initially looked to be a predictable result – but today’s Hung Parliament result reinforces that nothing is certain in these turbulent times. From a property standpoint, we know that investors don’t like uncertainty. However, uncertainty has become the new norm in both the UK and many other parts of the world, and the past few years have shown us that foreign investors are willing to take a long term view when it comes to investing here thanks to the strength of our institutions and global transparency. However, this morning we have seen sterling slide as an indicator that confidence in the UK is again faltering which is concerning in the short term.
“It is also a significant blow for housing that Gavin Barwell, the author of the recent Housing White Paper, has lost his seat. Yet another new Housing Minister will need to be appointed and we will have to see if his work is continued.”
Implies a welcome (if unintended) stability for real estate policy
Miles Gibson, Head of UK Research, CBRE
“While the Government might look weakened in the light of today’s result, the overall shape of Brexit isn’t obviously changed by it, nor are the UK’s strong economic fundamentals – which underpin its commercial real estate market.
“Inevitable heightened uncertainty while the political landscape stabilises, may cause the market to be slightly cautious in the very short term. However, most will ‘see through’ this uncertainty and focus on the fundamentals, implying that the current transactional activity will be largely unaffected.
“The decision to hold the general election at all comes with the benefit of a two year extension to the PM’s political capital. For trading businesses in the UK, particularly financial services businesses, this extra time will help them plan for the consequences of Brexit.
“This uncertain outcome also means that not much other than Brexit will occupy Ministers’ minds for some time, implying a welcome (if unintended) stability on real estate policy. Some of the more ambitious or expensive policies look likely to stay on the back burner purely because of a lack of capacity to implement them.”
This heralds a time of uncertainty for the country and the property market
Saul Empson, Director of Haringtons
“This heralds a time of uncertainty for the country and the property market, as the politicians now take the time to decide what it is that they want, and what compromises that they are prepared to make in order to bring these changes about. Watching to see who is prepared to work with who will be the key. We will undoubtedly see a weakening in sterling, which will be good news for foreign investors who are looking for a safe haven for money coming from the Middle and Far East and Europe. What is for certain, is that for anything to get done, the parties are going to need to work together, which will be an interesting spectacle.”
I remain dismayed as to why an election was ever called
Jake Russell, Director at Russell Simpson
“In the midst of another democratic disaster, I remain dismayed as to why an election was ever called. Since the Referendum we’ve been desperate to bring a sense of calm and stability to the political spectrum to help alleviate doubts and worries shrouding the property market, however, all this has resulted in yet more doubt and instability.
“With the pound floundering after today’s result we could well see another wave of Dollar buyers taking advantage of an improved exchange rate, but there will undoubtedly be some backlash in the market as some buyers pull out altogether amidst the uncertainty. It is difficult to see a clear direction from here, a Conservative/Lib-Dem coalition is unlikely, as is in all probability a coalition of all the minority parties. So this brings into question a second election. Whichever way we proceed, we must ensure we have the strongest Government possible to handle Brexit, it is imperative we negotiate a strong deal with the EU to make Britain an attractive investment destination.”
The ‘calm after the storm’ will see the market settle
Martin Bikhit, MD of Kay & Co
“With the Conservative party forming a government with the DUP and operating under a minority arrangement, political uncertainty will continue in the coming weeks and months ahead, particularly as Theresa May is being pressurised to resign. There are many questions which have arisen, including whether the UK will now negotiate a hard Brexit and which housing policies will be pursued under this new ‘confidence and supply’ arrangement with the DUP.
“We anticipate that the Conservative pledge to build a million new homes by the end of 2020, with an extra 50,000 by the end of 2022 will remain a focus for the government. House-building targets like this have proved notoriously hard to meet in the past, but the government plans to facilitate more building on brown land and to work with local councils to draw up schemes for more social housing. Social housing tenants who have lived in their properties for a certain length of time will be given the right to buy their homes, with the money raised re-invested in additional housing. Hopefully, measures like this will help get more young people on the housing ladder.
“We would also like to see a reform on Stamp Duty as it is an important measure to ensure the increase in transactions and sales in London. George Osbourne’s measures have resulted in a drop in transactions and a significant reduction in supply, which is good for no one. At £2,000,000, the price of a two bedroom apartment in Central London means that the buyer pays up to £213,750 in stamp duty. This is making people think twice about moving stopping ‘second steppers’ to move up the ladder, making way for first time buyers.
“For the London property market, we are expecting there to be a period of instability as the new government sets out its plans for the future of the UK but expect that the ‘calm after the storm’ will see the market settle.”
We are already seeing a surge in enquiries from our international client base
Penny Mosgrove, CEO at Quintessentially Estates
“It is crucial for the UK to quickly decide on the right leadership, not only for political continuity but also due to the resulting impacts on the economy and marketplaces. We must ensure, whichever way we proceed, that we have the strongest Government possible to handle the Brexit negotiations. It is imperative that the UK negotiates a strong deal with the EU to make Britain an attractive and appealing investment destination. Where there is uncertainty, there is always opportunity and with the pound sliding we are already seeing a surge in enquiries from our international client base, particularly from the US, Middle and Far East.
“While the immediate impact is a feeling of hesitancy in the property market in the short-term, confidence will return as the UK, and London especially will continue to be a safe haven for investors and the market will undoubtedly find its feet.”
The General Election has given the country pause to consider the type of government it needs in the Brexit negotiations
Adam Challis, Head of Residential Research at JLL
“The General Election has given the country pause to consider the type of government it needs in the Brexit negotiations. The right leadership is of course, crucial for the UK from a political standpoint, but will also directly impact the economic trajectory this country takes for many years to come.
“Under Theresa May, the UK has some political continuity, but a coalition Government provides the economy with less stability. The short-term impacts are uncertain and this could drag on housing market activity if clear political leadership does not emerge quickly.
“It is likely that we will see some ministerial shake-ups in the coming days and weeks. For the most part, big changes would be unfortunate with respect to senior housing market posts, notably the loss of Housing Minister Gavin Barwell. 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.
“Importantly for housing supply, the policy direction as set out in the White Paper on building more homes across the range of tenures, will be upheld. Supporting new methods of delivery such as Build to Rent and off-site construction are also emerging and exciting sectors that will expand the pace of housing delivery.
“JLL believes the housing crisis deserves greater ambition and bold action from the new Government. This requires cross-party support to de-politicise solutions and to provide longer-term backing for new solutions.
“We call on government not to lose sight of the key domestic policy challenges. It is vital that the UK government can forge a deeper commitment to housing supply solutions, recognising the common purpose of a wide range of stakeholders in the private sector.”
May is a good, honest, pair of hands
Trevor Abrahmsohn, Glentree International
“What A Disastrous Election Result Not Only For The Tory’s But For Britain
“I’m afraid it was the battle of the manifestoes and Disney triumphed over reality!
“I thought that the British electorate would see through the thinly veiled Labour Manifesto as the modern version of ‘Willy Wonker’s Chocolate Factory’ with more bribes than you can ‘shake a stick at’, but you know what they say about ‘fooling all the people all the time’! Since Mr.Corbyn was never going to get power, he was going to use the age-old trick of ‘handing out the sweeties’ to grab the youth vote and by golly they came in droves, like lemmings.
“The Tory Manifesto on the other hand, was a serious document from a Party who was confident of winning the Election and was noticeably absent of the ‘gimmicks’ and ‘give aways’, that the other side were handing out like confetti. This former version was responsible and relevant for the post Brexit era and the Labour version would have exacerbated the Budget Deficit and ballooned the National Debt by £230billion as the nationalisation process, that they were advocating, took hold.
“Why on earth did May so slavishly follow the advice of her inner circle strategist Nick Timothy and not Lynton Crosby who, after all, is the greatest electioneering tactician in the market today? Mr. Timothy has a left wing bent and evidently was the architect of the doomed ‘Dementia Tax’ debacle, which required May to perform an ignominious volte face, so as to avoid a ‘car crash.’
“Clearly the youth of Britain turned out in force and were suitably elated by the prospect of zero tuition fees and absolution from their student debts, whilst the ‘remoaners’ were concerned that the Tory’s were advocating a hard Brexit negotiation.
“Let’s be honest, soft Brexit is no Brexit at all, since it involves being part of the Customs Union, the Free Market and being accountable to the European Courts of Justice (ECJ). What is the point of Brexit if control is ceded to Europe by stealth?
“Although May will ‘limp along’ with the help of the DUP, undoubtedly there will be another Election for the Tory’s to try again and gain a worthy mandate and I am sure this will include a replacement Tory leader to go on and finish the Brexit negotiations.
“Why May did not wait until next year when the boundary changes would be complete and would have added another 12 seats to the Tory count, which today would have given her a majority government vote without the need to involve other political parties.
“Undoubtedly the Pound will drop further against the Dollar and Euro which, perversely, will render UK property even cheaper for the international buyers and, at the same time, help the exporters.
“I predict that property values will not change markedly unless Interest Rates/Mortgage Rates are increased in order to keep inflation under control, which seems very unlikely.
“Although May did not orchestrate a great Election campaign, particularly when she had surprise on her side, never the less, despite being a ‘bit stiff’, she is a good, honest, pair of hands as could be seen by her blemish free record at the Home Office for six years under the Cameron administration.
“Despite the Tory backbenchers, not known for their mercy when a leader has failed at an Election of her choosing, I do hope that they give her a chance to prove herself, having learnt some hard lessons of reality.
“In the meantime, I am sure that Mr. ‘Worzel Gummidge’ and the ‘goons’ in the Labour Party will be ‘the cat that got the cream’. How could anyone in their right minds think that these innumerate imbeciles could do a better job at running this great nation of ours? One of the great, unanswered questions of life.”
Investors in real estate look over the medium to long term
Chris Ireland, CEO, JLL UK
“The UK has faced political uncertainty in very recent history and, notwithstanding the dramas that immediately followed the Brexit vote, the UK economy and property market remained very resilient. The IPD benchmarking index has regained almost all of the losses it sustained in August over the past few months.
“Investors in real estate look over the medium to long term. London sees by far the most cross-border investment of any city globally, and the UK is rated by JLL as the most transparent real estate market in the world. This is a result of liquidity, the history of political stability over the long term and respect for the law, as well as factors such as the strong economic fundamentals, long lease terms and the comprehensive professional and legal framework.
“The result suggests that the hard Brexit that many were assuming would now definitely occur looks somewhat less likely. That could be a longer term positive for the UK market.
“Sectors with long-term structural support, such as Logistics and Alternatives, will remain strong. If the pound remains weak, Retail and Hotels will benefit – alongside UK manufacturing. But as before, JLL continues to believe the UK offers significant opportunities for medium and long term investors.”
The next housing minister must be an experienced and hard hitting political figure
Jon Neale, Head of Research, JLL UK
“With Gavin Barwell’s departure from Parliament, we are now facing the prospect of yet another Minister for Housing, the fourth in five years.
“Given the huge role that a high youth turnout has had in changing the political landscape, it must now surely be time for all parties to prioritise an issue that has had more negative impacts on young people than any other, and increasingly erodes the competitiveness of the British economy.
“The next housing minister must be an experienced and hard hitting political figure, and the role must be inside the cabinet. They must help develop a genuinely radical housing policy. Indeed, this should be seen as an electoral priority by all parties if the young continue to become more active at the ballot box.”
Leaves us with no mandate for a hard Brexit
Charles Curran, Principal at Maskells
“My initial reaction to the election result is that it leaves us with no mandate for a hard Brexit, or leaving the customs union. An interim measure such as joining EEA appears more likely; this is good news for economy.
“Housing builds are broadly the same for the Conservatives and Labour, but will ‘right to buy’ be traded to start the building? We are unlikely to see new taxes or old taxes such as Stamp Duty revoked or watered down.
“Undoubtedly there will be plenty of politics today to see if informal alliances can be agreed and only at this point will we have a better idea on policy. I’ll reserve comment on house prices in London until we can see what alliances are formed.”
Will deter overseas buyers from making a long term commitment to London property
Jo Eccles, Managing Director of Sourcing Property
“The election result is going to create further uncertainty which is likely to keep London housing activity at its current lower levels, certainly for the short term. We especially expect it to deter overseas buyers from making a long term commitment to London property, which will particularly impact the Prime market.
“UK owner/occupier buyers will still carry on with their lives, though, we saw this in the run up to the election none expressed concerns about the looming election campaign and it didn’t put off their decisions to buy property in order to upsize, move areas and so on. However, the uncertainty may delay non-necessity purchases such as buy-to-let investments.
“We are still experiencing companies moving very senior executives to London (less so with junior employees), but we expect the rental market to continue to be favoured vs buying for anyone relocating to the UK for a 3 – 5 year period, particularly at the high end of the rental market where stamp duty is putting people off making shorter term purchases. At the lower end of the rental market, we are likely to see mid-level professionals continue to want break clauses in their tenancy agreements to give them flexibility in these uncertain times.
“Sterling, at the time of writing, has plummeted, but even if there is a depreciation to come, I don’t think this will be enough to entice significant numbers of overseas buyers. We saw significant sterling falls after the Brexit vote but the political uncertainty outweighed the currency saving benefit, so this is likely to be the case until stability returns.”
The great thing about property is that it transcends political cycles
James Greenwood, MD of Stacks Property Search
“If we were hoping to wake up to ‘strong and stable’, and some political and European certainty to get a sluggish property market onto its feet, it seems we have to wait a little longer.
“So where does that leave us?
“In London, prices are approximately 20% lower year on year. We expect buyers, especially overseas investors who will take advantage of a suffering pound, to take advantage of this window that will almost certainly remain open until we have some answers to the Brexit question.
“In rural areas, prices have been steady for some time, offering sellers and buyers a stable market to operate in with no volatility to contend with. There has been plenty of opportunity for good negotiation. There is a severe lack of stock in many parts of the country, so good property is selling well. But we don’t expect much price movement over the next year. The politicians have given vendors no reason to start raising prices!
“Those looking to move from London to the Country are still being presented with a once-in-a-generation opportunity to swap a moderate London property for a spectacular rural home.
“The great thing about property is that it transcends political cycles. The important thing is to arrange transactions consecutively to proof against external factors. We have seen many clients make a move through the upheaval of the Scottish Referendum, 2015 Election, EU Referendum, US Election – to be in the house that works for them and their family and their life.
“So our advice to those who were hoping for some certainty so they could get on with their move is, ‘get on with it’. If you want to move, don’t hesitate, start making arrangements now.”
If it engineers a softer Brexit, then medium term the market will recover well
Paul Munford, CEO, Century Capital
”As the dust settles making sense of many mixed messages may be easier. But at the moment it’s difficult to see how this will pan out.
“It’s clear the Brexit voters switched in droves to Labour which was unexpected and highlights the misgivings many people have about EU exit.
“The upside of this should mean a softer Brexit…people did not vote to become poorer and may now be recognising that Brexit will be terrible for them and the wider economy
“So all very dramatic and uncertain which may not be great short term for Real Estate but if it engineers a softer Brexit with a trade deal and freedom of movement then medium term the market will recover well.”
Stability is crucial in enabling people to make big decisions such as buying and selling property
Jeremy Leaf, north London estate agent and a former RICS residential chairman
“A hung parliament will result in an extended period of uncertainty with decision-making kicked into the long grass. Theresa May is correct – we need a period of stability as that will quash uncertainty which is bad for the housing market – but it is not clear at the moment whether she can deliver it. Stability is crucial in enabling people to make big decisions such as buying and selling property.
“The hopelessness we are seeing on the ground about not being able to get on the housing ladder has come through. If there is one message that has come out of this election, it is that the young have voted overwhelmingly for change.
“Politicians will have to consider the needs of the young more than they have in the past which could mean more help for first-time buyers, perhaps extending Help to Buy so that it covers older properties as well as new build, dealing with affordability issues and more help on stamp duty.
“One thing all the parties agree on is that we need more housing so it has to be a priority for whichever formal or informal coalition is created.”
All markets abhor uncertainty and the housing market is no exception
Nick Leeming, Jackson-Stops & Staff Chairman
“The UK was promised a period of stability but today’s announcement provides anything but at this stage. All markets abhor uncertainty and the housing market is no exception. The priority now must be for politicians to provide reassurance by forming a Government as quickly as possible.
“The housing market has already been the recipient of doom and gloom in the news this week and certainty is now required to inject confidence and increase fluidity across all levels.
“With Gavin Barwell gone, it will be interesting to see what happens to the long awaited Housing White Paper that disappeared from the scene since its publication in February. Regardless of how the Government is formed, it is clear from each of the main political parties’ manifestos that housing is a priority and so a clear strategy must be put in place to tackle the problems of supply, high transaction costs and affordability.”
What a mess!
Jason Rishover, CEO of Heronslea Group
“What a mess! This shock result means that all the uncertainty surrounding the housing market and the lack of confidence in buyers will continue. The country will not have a clear direction for some time, and it will be time consuming and challenging for both parties to agree on policies. Brexit will now be much more problematic.”
London’s voice has been heard
Ellie Rees, Owner/Director of Brickworks
London has a voice again.
Because the recent Brexit vote was not representative of the vast majority living here, the outcome, at least means that London’s voice has been heard. People we talk to are pretty pleased.
The public’s turn towards Labour and investment in social care and services, is a turn towards community and away from individualism. In property terms, this means considering a philosophical adjustment in our thinking: from property as investment, to property as home.
Looking forward to people buying property for the right reasons; more first time buyers getting on the ladder and investors shrinking their portfolios.
Uncertainty in the market isn’t great of course, but increased cross-party debate, is. People will adjust and move on with their lives.
Many housebuilders will hit the pause button on their investment decisions
Greg Hill, Deputy Chief Executive at Hill
“No business likes uncertainty and housebuilders like it least of all. This hung parliament and the horse-trading that will take place over housing policy to get a coalition in place means that many housebuilders will hit the pause button on their investment decisions. This is the exact wrong moment for a construction slow down. The country needs new homes desperately. We hope that the negotiations are concluded rapidly so that the new government is in place and ready to work with the sector to go out and get building.
“There is room for compromise and we have seen all political parties put housing at the centre of their manifestos. The Conservatives’ Housing White Paper mapped a blueprint for boosting housebuilding rates and their manifesto committed them to building 1.5 million new homes by 2022. The Labour Party, meanwhile, has pledged support for first time buyers in the form of a stamp duty holiday and the extension of the Help to Buy scheme. It is most likely that the Conservatives will form a coalition with minor parties and we hope that measures to support first time buyers and boosted housebuilding rates will be protected at the heart of the deal.
“Delivering these proposals should not be overshadowed by the impact of Brexit. As part of the negotiations the new Government must act immediately to keep the flow of talent from the Continent open. We will not be able to deliver 1 million or more homes by 2022 if we don’t have a sufficient volume of skilled builders to construct them.”
The next 48 hours will be very interesting
Charles Smith, managing partner of London Real Estate Advisors
“Uncertainty is always unsettling for all markets, not least the property market. Despite this, it was encouraging to hear Michel Barnier making considered and welcoming statements this morning about an EU/Brexit deal, a contrast to the previously hard line being issued by the British government.
Any signal of a mutually happy exit deal will be very welcome, especially in the financial services sector, so important to a healthy property market. The next 48 hours will be very interesting.”
Swap rates have not moved
Mark Harris, chief executive of mortgage broker SPF Private Clients
“While a hung parliament may have been unexpected, Swap rates have not moved in response to the surprising outcome. What’s more, we don’t expect to see a great deal of change. Theresa May appears to be forming a government and will carry on, which is better for the market as uncertainty tends to cause the most fluctuations.
“It is very much business as usual. Lenders remain key to lend and the oversupply of money will continue to keep mortgage rates low. There is less reliance on the Swaps market anyway, with some lenders still accessing cheap funding via the Term Funding Scheme and others lending the cash they are attracting via ‘best buy’ savings rates.”
Interest in the UK market from foreign investors from outside Europe should continue unabated
Walter Boettcher, Chief Economist at Colliers International
“Sterling may be down by 1 to 2% against the Euro and the USD, but the FTSE 100 is up by 1%, no doubt the result of sterling’s movement. Generally, the indicators are stabilising within the familiar trading range of the first half of 2017.
“In one sense, the result is disappointing in that another period of uncertainty and lack of political resolve will not help our market, with some political observers even suggesting that political machinations may result in another election in a few months’ time.
“In another sense though, the result may offer the prospect of a wider church where a broader democratic consensus on the UK’s negotiating stance on Europe may arise. The prospect of a more balanced national consensus and the likelihood of a ‘softer’ Brexit may explain the moderate financial market response to the election result.
“Meanwhile, interest in the UK market from foreign investors from outside Europe is likely to continue unabated as their motives are often shaped by events outside of the UK, especially long-term investors. Domestic investors have already been exercising caution and this will no doubt continue until the shape of the post-election settlement becomes clearer and stabilises.
“The headlines may become uncomfortable over the next few weeks, especially as the EU Council meets on the 22nd of June and were hoping to have begun serious discussions. It is hard to see how this will progress in the absence of a clearer mandate. It was already hard to see how the negotiations would progress given the uncertainty posed by the need of another Greek bailout in the summer and a German election in September. It looks to me like greater Brexit clarity will remain elusive until the EU Council meets on October 19th, unless of course we find ourselves in the midst of another general election.
“In short, it is looking like business as usual in the UK, or at least a post EU Referendum version of normality.”
The real elephant in the room is the Tory manifesto pledge to hold a full housing review
Iain McKenzie, CEO of The Guild of Property Professionals
“The UK wakes up today to the shock news that there is a hung parliament with no party winning the required 326 seats to form a majority. Clearly the decision to call a snap general election has backfired with the original 15 percentage point margin between the two major parties in polls materialising as just a 3-percentage point margin.
“There will be a period of uncertainty as the new government forms. We have a good idea of what a Conservative minority government may look like for the housing sector from analysing their manifesto and previous commitments.
“At a time when instructions are scarce, fees are at an all-time low, conveyancing is taking longer than ever, and tenant fees are to be banned, the housing sector needs a government that understands the housing crisis needs to be a priority.
“What should we expect from Theresa May and the Conservatives as the largest party in the House of Commons in the housing sector?
“In a recent report it was alleged that a higher percentage of home owners thought that the Tories policies were more relevant and sympathetic to homeowners, but do sales and lettings agents working in that sector feel the same?
“Interestingly, I would be unsure how that debate would conclude, as recent changes to SDLT and proposed changes to lettings agents charging tenant fees, have been very unpopular.
“So what should we all expect in the next four years?
“It is very unlikely that the government will amend or reverse changes to Stamp Duty, why would they? It is raising extra income for the treasury. It is also cooling the UK housing market and reducing transactions levels enabling first-time buyers to get onto the property ladder.
“The proposed tenant fee ban concluded its consultation process on the 2nd June and the outcome will be delivered shortly. All industry experts I have spoken to don’t expect any change in direction. The ban has already been implemented in Scotland and Wales and so it appears a foregone conclusion.
“But the real elephant in the room is the announcement within the Tory party manifesto that they intend to hold a full housing review, with particular emphasis on the cost of moving. They intend to make it cheaper for customers. Although in the short term this may be sidelined by other priorities, at some point this pledge will delivered.
“Is there a vendetta against the sector? Or will the Conservatives be considered a party that estate agencies can rely on to produce policies for growth?
“None of us know the answer to that. All I do know is that when the housing minister is appointed they need to get a holistic view of the challenges facing the UK housing market from the agent’s perspective.
“This must take into consideration the thousands of independent agents and not just the corporates who try to influence policy for their own benefit.
“I will be writing to the new minster offering my services as the CEO and representative of The Guild of Property Professionals members. ”
Uncertainty will cause prospective buyers to stay out of the market
Matthew Turner, CEO of Astute Property Search
“With a hung parliament, we are now likely to see more instability in the market and economy. The British pound will weaken, providing international purchasers with the further opportunity to purchase with a favourable exchange rate. However, uncertainty will cause prospective buyers to stay out of the market, leading to fewer transactions going forward. The next few days will see negotiations which will decide whether we enter into a coalition or a minority labour government and with Brexit on the horizon, the uncertainty is set to continue for the foreseeable future.”
A challenging situation for the British Luxury sector
Helen Brocklebank, CEO of The Walpole Group
“A hung parliament presents a challenging situation for the British Luxury sector, as for British business overall, in that the crucial Brexit negotiations cannot take place until the government is settled, yet the EU is unlikely to be willing to delay. It may bring the welcome prospect of a softer Brexit but the immediate impact is, of course, a great deal of uncertainty.”
Business as usual for the prime market, as long as the expected coalition is formed swiftly
Mark Parkinson, Director at Middleton Advisors
“I think in isolation of Brexit we have been here before in 2010 and had a fairly effective coalition guiding us through the some financially tricky years. Labour has the same amount of seats they won under Gordon Brown. The question mark is how Brexit now pans out, but putting it in perspective Brexit was never going to be simple and straightforward. As long as the expected coalition is formed swiftly then for the prime property market we expect business as usual.”
This is a less seismic shift than the decision to leave the EU
Andy Foote, sales director at Seven Capital
“Following the EU referendum, we saw a slight pause as the market digested the immediate impact of the decision. Arguably, this is a less seismic shift than the decision to leave the EU and in a matter of days we will have a clearer picture on the way forward.
“While the London market may be more sensitive to a change in central government, for the short term, growth markets 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.
“The cornerstone for all property investment is a sustainable pool of tenants. With Birmingham’s current regeneration strategy supporting significant job creation, the city’s rental market is incredibly buoyant and shows no signs of waning.”
Transactions will continue to fall in Prime Central London whilst investors assimilate the new situation
Naomi Heaton, London Central Portfolio
“Given the unprecedented turn of events as the UK election results are announced, there will undoubtedly be an impact on the UK and London housing markets.
“Whilst it is most likely that the Conservative party will form a coalition with the DUP to create a working majority, the UK looks set to face an extended period of uncertainty, historically unattractive to inward investment.
“However, as it does not appear possible for Labour to form a rainbow coalition with the other remaining parties, the uncertainty caused by a possible second EU referendum may have receded. In addition, the weakened position of the Conservative party, in conjunction with a pro ‘soft-border’ DUP, would suggest that the UK will be on course for a softer Brexit.
“This outcome may well be attractive both to institutions considering their position in the City of London and international investors looking at the UK, particularly as global events such as the Trump-Russia affair and continuing destabilisation in the Middle East is causing even greater economic and political flux outside the UK.
“The diminished threat of Labour implementing aggressive un-costed tax and spend policies will also be welcome both to business and investor sentiment, taking the edge off uncertainty caused by these election results. Significant tax increases targeted at property investors that Labour might also have instituted are now less likely to occur.
“Whilst sterling has rallied slightly in the early hours of today, it is now between 2% and 3% down against the dollar and euro from yesterday (as of 9.00am 09/06/17) from an already weak position. This is likely to continue in the current political situation which may encourage more active investors to take advantage of discounted prices in the property and stock market.
“Nevertheless, it is anticipated that transactions will continue to fall in Prime Central London whilst investors assimilate the new situation, particularly at the luxury end and in the new build sector, already battered through the introduction of new residential taxes.
“For the domestic housing market, outside Prime Central London, the recent evidence of a downturn by most data analysts, due to concerns over a weakening UK economic position and rising inflation, is unlikely to be reversed in light of the current events.”
The potential for swift decisive change has disappeared overnight
David Hannah, Principal Consultant, Cornerstone Tax
“This morning’s result is seen by some as a victory but it will be seen by many property owners, investors and developers as disappointing news.
“The paralysis of a hung Parliament will almost inevitably mean that policy will be put behind compromises that keep someone in power. This is ultimately damaging for the country and the property sector as the potential for swift decisive change has disappeared overnight.
“Despite mounting evidence that the Government’s policy first started by George Osborne MP when he was Chancellor of the Exchequer to progressively increase stamp duty to punitive rates and battering the private rental sector with unilateral withdrawal of deduction of business costs (their interest) has created a perfect storm of falling house sales and thereby SDLT receipts, whilst the surge of first time buyers who might have been expected to take advantage of landlords selling off their portfolios has not appeared because of the unusually restrictive conditions for qualifying for a mortgage.
“What we urgently need now are for Government to consider three straightforward measures that would help the market get back on track. By abolishing the ridiculously complicated and stringent restrictions on qualifying for mortgage finance to buy your own home, removing stamp duty for house builders who buy land provided they build homes within two years, and by putting an end to the 3 percent surcharge, at the same time as rolling back the changes to income tax on the private rental sector, the Government could ensure in these uncertain times that they are injecting certainty back into the housing market.”
Weakening of sterling will again, like after the Brexit vote, potentially provide a currency boost for overseas property investors
Randeesh Sandhu, CEO of Urban Exposure
“The morning after it is still too early to tell what this election result fully means. In the short-term at least what we do know is that the key fundamentals that support the UK housing market remain. The UK domestic housing market is driven by the availability of jobs, house prices and mortgages, and it is too early to say if last night’s result will have any specific impact on these factors.
“Uncertainty is never good for markets and that’s the biggest negative from an economic and real estate market perspective. On the flip side, the weakening of sterling will again, like after the Brexit vote, potentially provide a currency boost for overseas property investors. The suggestion that today’s result may also point towards a softer Brexit is also a potential boon.
“Even yesterday we were hearing contradictory views on why Theresa May called the election in the first place and what a stronger than expected Labour performance might mean. Did Theresa May want to strengthen her negotiating position to allow her more room to argue for a softer or harder Brexit? Would a resurgent Labour be damaging through higher taxes or provide buying opportunities via increased volatility? It’s clearly too early to fully analyse the result and its impact, but we remain confident on the fundamentals of the UK property market.”
Unlikely to affect the overseas market in a big way
Lloyd Hughes, Athena Advisers
“Uncertainty is going to continue, but from a British buyers perspective it’s something they’ve become accustomed to over the last year so it’s unlikely to affect the overseas market in a big way. It’s important that a sense of direction is forged as quickly as possible so that some stability returns to the country and the market. There has been a dip in British-led property investment both domestically and internationally since the Referendum result last year, so I’m particularly keen for the Brexit negotiations to commence quickly with a positive outcome.
“As for other markets, we expect to see dollar and euro buyers redouble their efforts as they have now been given an extension to the favourable currency conditions they’ve enjoyed since last year’s referendum vote. London will become and even bigger target, for residential and commercial properties and euro buyers targeting common British second home markets like France will continue to step in where some British have fallen away.”
It will take time for new policies to be introduced and agreed on
Anthony Rushworth, CEO of Homegrown
“We are a new crowdfunding platform offering all types of investors the opportunity to invest in large scale, residential projects by established property developers. The hung parliament result will have an impact on both the housing market and economy. All parties have been committed to increasing housebuilding in the UK, which will boost the construction industry. It will take time for new policies to be introduced and agreed on. We’ve been here before though, and while it may take a bit longer, we will find solution.”
The fundamental long-term attractiveness of the UK can survive short term political shocks
Phillip Churchill, Founder and Managing Partner of 90 North
“Since the Brexit vote our international investors have continued to be attracted to the United Kingdom for real estate acquisitions, not least due to the relative value of Sterling. But over the past few weeks they have chosen to delay their decisions pending the outcome of the General Election. Whilst there is no doubt that some investors may remain cautious, I suspect that the Conservatives – by a margin still the largest party – will return a pro-business government and the vast majority of investors will continue their acquisition programmes, as the fundamental long-term attractiveness of the UK can survive short term political shocks.”
The good news is that the hard Brexit fundamentals may be softened, reducing the concern over an adequate labour supply to build the housing we need
Brendan Sharkey, Head of Property & Construction, MHA MacIntyre Hudson
In construction and real estate we can expect to see:
- Sterling fall against the major currencies, facilitating UK assets such has London housing stocks and commercial property being cherry picked
- Stagnation, if not a slight fall, in house prices across the UK
- Local authorities trying to take more control over the delivery of affordable housing
- Less volume in house sales, which will lower the Stamp Duty Land Tax take for the government
- Build to Rent to continue apace, as the rental market has not gone away. The companies in this market may find less competition for quality sites.
“We are left with a hung parliament with a potential for a new conservative leader to come forth and take us to another general election in the autumn. In the short term, this means indecision – little is likely to change when the prospect of new policies is on the horizon.
“Once sterling has fallen, along with the stock market, we’re likely to see more hesitancy, unlike post Brexit which seemed to be a stimulus for economic activity. Many longer term investment decisions by UK and international corporates will be put on hold.
“The Conservatives white paper, “Fixing our Broken Housing Market”, was very much the heartbeat of their election manifesto with a few tweaks towards more intervention with local authorities. The white paper was not considered revolutionary, but it was recognised as a genuine attempt to deal with the housing shortage. We would like to think that, come the autumn, whoever is in power will stick to the basic principles , if not improve on them.
“Both the Conservatives and Labour recognised the need to build new homes and the only difference between them was how many, and by when. The Conservatives out-bid Labour by committing to build 1 million homes by 2020, with an additional 500,000 by 2022. Such targets are unlikely to be met while we have this political vacuum.
“The construction industry is forever plagued by leadership and policy changes as most infrastructure projects cross over elections, meaning there is never clear water to steer towards.
“The good news is that the hard Brexit fundamentals may be softened, reducing the concern over an adequate labour supply to build the housing we need. The sheer cost of moving along with lower net incomes due to inflation and job insecurity could also mean more extension and refurbishment work for the SME builders.”
You can definitely see a fear factor with purchasers, especially at the higher level
Henry Fordham, Director of Bellis Homes
“The quicker a resolution can be found and a Government formed, the better and although a turbulent night below are my thoughts on the General Election.
“I believe that if we can gain the stability we have been craving for, the housing market can slowly push on.
“You can definitely see a fear factor with purchasers, especially at the higher level, when it comes down to final decision making. Labour policy on general taxation (especially land) to me seems like a hit on homeowners. However, housing policy from both parties seems to be a far cry from reality, to achieve the 1million new homes by 2020 target from the Conservative party is not achievable at the current rate.
“There is still far too much bureaucracy with regards to planning; red tape policy is not enabling this targeted growth. The NPPF was enacted to ensure that objectives were met, but this, in my opinion, is inactive. We see it too many times where there can be one objection to one element which could stop an entire development of 10s of houses, including affordable. That means, you can meet 9/10 criteria’s, but if they all are not met, local government have sufficient grounds to refuse an application. This, along with further ways of encouraging growth in the housing supply, by supporting further HTB initiatives will create a much-needed level of equilibrium of the lower end market.
“My allegiance for this election, as it has since 2010, will side with the Conservative party. Of course, there can be improved policies, but we have had too much turbulence over the last few years, with Brexit/Trump results taking place. The market could do with some stability. In my opinion, Jeremy Corbyn does not only veer from that, he creates uncertainty with his pacifist approach.”
People still need homes and we need to keep building
John Elliott, Managing Director of Millwood Designer Homes
“Waking up this morning, the results of the election are very disappointing, and the uncertainty it now bring for the future of the country and the Brexit negotiations are concerning.
“As far as the housing industry is concerned, I do not see why it should make any difference and it should be business as usual. Even though it’s early days, as far as I am aware, Theresa May will remain Prime Minister. I have not seen anything other than the statement issued by Downing Street this morning to suggest otherwise and I can’t see this making much difference to our industry, as it stands. People still need homes and we need to keep building.
“There is nothing to suggest that demand for housing will change. However, if Corbyn had been successful, and introduced the garden tax, I think that would have had a detrimental effect on the market, alongside his other polices on taxation.
“If Theresa May were to step down now, I am not sure who the best candidate it to lead the party and the country. My personal view, is that the one bit of stability should remain, is if Theresa May remains in office and continues to negotiate a good deal for the UK’s exit from the EU, and forges ahead with her policy to build a million new homes between now and 2020, and another 500,000 by 2022.
Investors will delay their UK plans
Adam Paul, Real Estate Editor at Tranio.com
“The hung parliament means only one thing: further uncertainty. With neither party achieving a parliamentary majority, the pound slid 2% against the dollar and fell 1.7% against the euro. In any case, Theresa May is seeking to form a government without a majority in the house; pairing up with the pro-Brexit DUP. So we can expect the pound to recover these losses as the Conservatives should be able to fulfil many of their pre-election promises. However, it remains to be seen whether May will remain prime minister. Taking this into account, foreign property investors are more likely to take a wait and see approach since it is unclear if and how well a minority government would function.
“The result also causes further disquiet in regard to Brexit, since a minority government is sure to come up against additional difficulties in negotiations with the EU. This in turn will also lead investors to delay any plans for investment in the UK. In theory, this should all lead to a short-term increase in supply on the housing market, thereby limiting price growth. Moreover, since both the Labour Party and the Conservatives manifestos included plans to boost housing construction, the restriction of price growth could continue over the medium term. However, investment in construction will be dependent on the outcome of those all-important Brexit negotiations.”
An unexpected and frustrating result
Richard Deans, Sales Manager at MGM French Properties
“This is an unexpected and frustrating result. I urge politicians to work in the interest of British people to form a government which can handle the challenges of Brexit effectively. Specifically, I would like the Government to focus on keeping Europe accessible to UK residents following the Brexit negotiations. It is imperative that cross-border property investment remains an attractive proposition to buyers.
“I would also urge the Government not to impose additional levies or taxation on UK residents who choose to purchase additional property in European countries.”
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