On May 7, the United Kingdom saw its second monumental election in six months (after the Scottish referendum last autumn) when the general election was carried out. Conservative Party incumbent Prime Minister David Cameron has had a typically hot and cold run: he’s been accused of elitism, cronyism, and being “out of touch” with regular Britons. Elsewhere his vow to reconsider EU membership, blessing for Scotland to hold its vote and implementation of a clutch of education, healthcare and immigration reforms has won him points (though in late April Labour called the Conservative attitude irresponsible after HSBC threatened to move). But high on the list of priorities for the next government will be how the country deals with its housing shortage. That could have an influence on overseas investors for whom London is the Holy Grail.
That Was Then
There are five major political parties in the UK (admittedly three viable ones), each with its own ideal of how to address the housing issue. At the head of the list is the Conservative Party, whose manifesto included extending the right to buy to over one million home associations across England, discounts for buyers under 40 and a £1 billion brownfield regeneration fund to exploit sites for up to 400,000 homes. Labour, of course, was a bit more aggressive, pledging 200,000 new homes by 2020, three-year private sector tenancy agreements and rent increase caps, prioritising local, first-time buyers in new developments and capital investment in property to build more affordable housing.
The other parties were also-rans, as the fight came down to Tory and Labour. But the Liberal Democrats had vowed to increase housing starts to 300,000 per year and to plan at least 10 new Garden Cities; the UKIP proposed a million new homes on previously developed land by 2025 and eliminating the stamp duty on those homes’ first £250,000; and the Green Party pledged 500,000 social rental homes by 2020, getting 350,000 unused homes back into circulation, rent caps and introduction of five-year tenancy agreements and abolishing the right to buy council homes.
All the parties’ platforms, obviously, were built around Britons living and working in the country right now and trying to find a home. The ability to purchase council homes and the power of home associations are not problems that directly impact investors. Rumblings of a mansion tax in addition to the new capital gains tax (officially launched in April) and fines or penalties for vacant flats — and end to non-domicile benefits — and a rental cap were, however, talking points on the campaign trail.
This Is Now
Though polls on Wednesday has the Conservatives and Labour (led by Ed Miliband) in a dead heat, by the morning of Friday, May 8, the UK had another Conservative government with a slim majority of 331 seats. “I want my party, and I hope a government I would like to lead, to reclaim a mantle that we should never have lost — the mantle of One Nation, One United Kingdom,” Cameron told the press on election night.
“Thank goodness common sense has prevailed and David Cameron has been totally vindicated,” Andrew Langton, chairman of Aylesford International effusively declared in a statement. “It would appear the Conservatives will now have a well-deserved majority to run this country without the confines of a coalition government.” Langton echoed many by adding the Tory victory was a sign the UK was back to business as usual. “Britain is open for business and this is good news for the property market. The Conservatives are safeguarding the UK economy and the impact on the property market will be significantly positive,” said Alex Newall, Managing director, Hanover Private Office, who was quick to point out that Cameron had pledged more construction and lower stamp duties at the entry level of the market.
Leasing was in something of holding pattern as well. Benham & Reeves Residential Lettings’ Managing Director Anita Mehra was less hyperbolic but largely in agreement, theorising the election was cause for a collective sigh of relief in London property. “The private rental sector in the UK needs a further £1.4 trillion in investment over the next 20 years but the opposing Labour party was proposing punitive tax rates for foreign investors, a cap on rents, mandatory three-year tenancies and other measures that would have deterred investment,” she argues. In the wake of the Conservative victory, Mehra predicts strong economic performance and continued capital growth. “Labour’s policies were the ‘politics of envy’ whereas the Conservative proposals actually address the underlying issues affecting the housing market and are sound economic policies,” she finishes.
So are we sitting on the brink of a rush on UK property? Regardless of how strongly London performed, popular wisdom held that many international investors had been waiting on the results of the election. Aston Chase Director Mark Pollack expects, “A surge in demand resulting in increased transactions and the potential for further 5 to 10 percent capital growth over the next 12 months.” Mehra notes price cuts in some sectors and modest gains (1 percent) since the beginning of the year have created a very brief window of opportunity that will close quickly. “Prices will inevitably go up this year now that we have economic and political certainty but for those willing to move quickly, there are some properties currently on the market that represent very good value.” She also predicts rental increases in step with prices. “In the last quarter, we saw rents in many parts of central London fall as tenants were hesitant to trade up to nicer properties until after the election. That pent up demand is soon to be unleashed and with it we will see rents go up.”