When the Prime Minister called the December 2019 election, his aim was to achieve a parliamentary majority in order to ‘get Brexit done’.
Following events last week, the Conservatives did indeed win a majority in Parliament – and a comfortable one at that – the largest for the Conservatives since 1987. But what will this mean for the property market?
In the immediate aftermath of the election results, Sterling and a sample of property related stock prices, notably house builders, immediately rebounded with some investors/institutions reporting a desire to utilise capital reserves rather than have it sitting in the bank.
The market likes clarity and as we start to achieve that objective, some commentators expect Sterling to continue to rise back towards pre-Brexit levels as further milestones in the UK departure are reached.
Meanwhile the residential market may yet recover with investors relieved to avoid strong rent control and homeowners likely to continue to enjoy low interest rates. We are also likely to see a bounce in activity in the leasing and investment markets if investor and business confidence returns.
But whilst international property investors will be somewhat relieved that Labour’s high-tax and redistributive plans have been rejected by the electorate, don’t expect foreign investment to flood back into the UK just yet.
The challenges of Brexit – in economic and procedural terms – remain omnipresent.
The UK property markets and economy appear to be at an inflection point, with details of the transitional trade negotiations with the EU, as well as key issues facing real estate still outstanding until Brexit is finalised.
Ideally, with clearer direction for the UK this will create clarity and stability that will breed confidence in the property markets.
In the run up to the election both the main parties remained quiet on major infrastructure projects such as HS2 and the expansion of Heathrow due to environmental momentum.
With the environmental impact of Heathrow expansion in mind, the Conservatives placed the responsibility on Heathrow as a private sector matter, to demonstrate mitigation for air quality and noise impacts.
And whilst Heathrow anticipates that a new runway could be ready by 2026, this will be very much dependant on private sector investment post-Brexit.
It will be interesting to see what happens regarding both, now that the Conservatives are in power.
In its draft Aviation Strategy policy paper in 2018, the government anticipated that the expansion of Heathrow Airport would meet forecasted aviation demand to 2030. But they also safeguarded a supply of land elsewhere through policy, to ensure that sustainable aviation growth is not hindered by inappropriate development.
If we see significant investment in infrastructure as promised, could we see further aviation expansion under the Conservatives? Only time will tell.
The green agenda
One of the headlines in the Conservative manifesto was ‘Reaching Net Zero by 2050 with investment in clean energy solutions and green infrastructure to reduce carbon emissions and pollution.’
We look forward to the stated investment of £9.2bn in energy efficiency of homes, schools and hospitals. However, there was limited comment regarding how this will be carried out in relation to the emissions from commercial property.
With the government already consulting on revisions to Energy Performance Certificates minimum ratings by 2030, time will tell whether the government maintains their green ambition or chooses to abandon this EU-led legislation.
All eyes will be on the first budget to see what the priority really is.
There remain a significant number of issues for our new government to resolve, from housing supply and climate change, to regeneration of our high streets and town centres.
As we look ahead, we can expect to see additional challenges around issues such as Scottish property investment which will no doubt be raised in the context of Scottish independence.
When it comes to infrastructure, we would like to see significant investment in strategic projects like HS2 and Heathrow expansion, and we await more detail surrounding the promises of a ‘far-reaching environmental programme’.
And whilst we clearly welcome aims to make us carbon neutral by 2050, there needs to be clarity for the building industry around what this will mean in practice if we are to deliver residential schemes in line with government targets and demand, n a climate of tight planning controls.
It is widely acknowledged that we need to see considerable investment in infrastructure and a rapid delivery of residential housing on the ground.
With this in mind, we want to see a strategic overview of residential delivery and would welcome incentives from government for SME developers and PLCs to address housing delivery versus population growth predictions.
Parliament resumes today (16 December) and the Queen’s speech is scheduled for later this week (19 December). The Prime Minister will be keen to push through the Brexit Bill as soon as Friday 20 December.
The UK looks set to withdraw from the European Union as early as January 2020, with trade deal negotiations due to start shortly after and we will likely see a Budget follow, early in the New Year.
So, now that the people have spoken, what we all need now is clarity on the future relationship between the UK and the EU and for Boris Johnson to deliver on his promise to work ‘night and day’ to repay the trust of the electorate.
Until then, it will be very much business as usual and the devil will be in the detail which will come out in due course.