Today, the UK House of Commons backed Prime Minister Theresa May’s call for a snap general election this June. Members of Parliament voted by a margin of 522 to 13 for the election to go ahead, which will see Parliament officially dissolved in May and the country go to the ballot box once again on Thursday 8th June.
Before May’s announcement, the next general election was not expected to take place until 2020, due to the Fixed Parliaments Act, which limits elections to taking place every five years. An election can be held earlier, though, if two-thirds of MPs vote for one to take place. As a result, the election that would have loomed over the UK’s upcoming Brexit negotiations with the European Union will take place before the talks officially begin, freeing up the country to focus solely on its exit from the EU.
What impact will the general election have upon the UK property market? We break down the areas investors will be monitoring closely over the coming months, rounding up reactions from industry experts.
Will the general election stop people buying homes?
Traditionally, general elections have always correlated with the performance of the UK’s housing market. The uncertainty in the run-up to the national vote has historically caused a temporary slowdown in activity. Where that build-up usually lasts for several months, though, 2017’s snap election is only seven weeks away, which means that experts expect any impact to be minimal and brief.
Indeed, a poll from online estate agents eMoov found that 56.7 per cent of sellers and 59.2 per cent of buyers said that they would still continue with transactions regardless of the snap general election. Just 18.4 per cent (and 17.5 per cent) said that they would wait and see what the result of the poll is before continuing with a sale or purchase.
“Since the vote to leave the EU we’ve seen the market remain remarkably resilient despite a degree of buyer uncertainty which essentially acts as property transaction kryptonite. Therefore, the eradication of questions around the legitimacy of the EU vote, a second referendum and any other opposition will only serve to buoy the housing market further and should see a large degree of stability return going forward,” comments Russell Quirk, Founder & CEO of eMoov.
After the election, meanwhile, there is historically a boost to the number of transactions, as a result of renewed certainty. Due to the shortened time span before the poll, that boost will also take place sooner rather than later.
Will the general election impact house prices?
Confidence is an important factor for property values, and the period of uncertainty a general election usually brings means that sellers will often discount asking prices to stimulate a sale.
In the UK, though, another factor is equally important for property values: an ongoing lack of supply. The chronic housing shortage of stock across the country has continued to underpin capital growth, with the broad consensus from house price indices forecasting price growth of 2 per cent in 2017, despite any uncertainty surrounding the start of the Brexit negotiations.
The short amount of time before the election means that any impact upon property values is unlikely to be dramatic.
“When it comes to the UK property market, it’ll be business as usual,” predicts Jonathan Stephens, MD of Surrenden Invest. “There remains a chronic undersupply of housing and for whoever ends up in power as a result of this general election, building more homes and supporting the UK property sector will no doubt be at the top of their agenda.”
While this is true of any party winning the national vote, though, the Conservative Party is widely expected to win the election, cementing their position ahead of the Labour Party and the Liberal Democrats.
Jean Liggett, CEO of investment specialists Properties of The World, comments: “I think the announcement is very positive news for the UK property market. PM May needs a popular mandate and the General Election will give her that. I expect the Tory majority will increase in the House of Commons at the expense of Labour seats.”
“The General Election will stamp May’s authority and decrease uncertainty going into negotiations regarding the UK’s exit from the EU,” Liggett adds. “This certainty will positively impact on the UK property market, resulting in increased sales, increased prices or at least no decreases.”
Will the general election deter property investors?
Despite any temporary slowdown in transactions in the lead-up to the election, confidence about the result will likely minimise any degree of uncertainty. Indeed, a stronger Tory majority would mean less opposition to the government’s Brexit negotiating plans, which would make the country’s future much more predictable and stable for investors.
“Any kind of instability can easily frighten investors or property buyers, however we would expect that the impact of this snap election may simply elongate people’s decision making process on whether to move or invest in property,” comments Philip Woolner, joint managing partner of Cheffins.
“The prospect of five more years of Conservative rules will be seen by many as a real positive,” observes Ed Heaton, managing partner of property search agency Heaton & Partners.
“Should the polls be correct and the Conservatives win with a decent majority, we would expect a boost in the market as many property investors will welcome another five years of Conservative government,” adds Woolner.
“UK and worldwide property investors will continue to make the UK a primary market for them to invest in,” comments Liggett.
What does the general election mean for the pound?
The exchange rate between sterling and other major currencies has been an key consideration for many investors in UK real estate in recent months. Since the country’s vote to leave the European Union, the pound has fallen against the dollar and the euro, making property in the UK more affordable for American buyers and other investors.
At the same time, a stable, or strengthening, pound is a sign of confidence and certainty. Investors will therefore likely welcome the behaviour of the pound since the announcement of the general election on Tuesday. As of Wednesday afternoon, the pound has surged to its highest level in 2017 so far, holding on to its gains against the dollar and euro at $1.202 and €1.196.
Tuesday’s rise of 1.6 per cent was the currency’s biggest one-day increase since March 2016, reports The Independent.
Commenting on the pound’s performance, UK Chancellor Philip Hammond told the press that it showed “the confidence that the markets have in the future for this country under a Tory Government with a new mandate”.
“Unlike usual general elections, where contending parties draw up their manifestos and there is a degree of uncertainty as to the outcome, come the wee hours of 9th June I am fairly confident that the UK will remain under the control of Prime Minster May and the Conservative Party,” adds Stephens. “The Tories set out a clear plan back in 2015 which has pretty much been consistently executed over the last two years and we see no reason why it should not continue.”
What else could the election mean for the property industry?
While there may not be much time for campaigning, the real estate industry is likely to call for several issues to be tackled by politicians. This will primarily relate to the buy-to-let sector, which has faced a growing headwind from the Conservative government in the last year, in the form of stamp duty surcharges and mortgage interest tax relief changes. Investors and landlords may take June’s election as a chance to pressure the government into scrapping stamp duty on the first £125k of a buy-to-let purchase or reversing the phasing out of tax relief.