UK election: what does it mean for the housing market?

After the UK’s shock Brexit vote last year and the election of Trump in the US, ‘surprise’ results at the polls are no longer much of a surprise.

In the latest twist, the UK’s ruling Conservative party – which had expected a landslide election victory – have lost their majority and the country now has a hung Parliament.

Prime Minister Theresa May appeared to be in a strong position when she decided to call an early election – particularly since her main rival Jeremy Corbyn, the Labour Party leader, had been widely depicted as a left-wing figure with little credibility.

With talks due to start with the EU about the terms of Britain’s departure, she was expecting that voters would give her a clear show of support to enable her to take a tough line in negotiations.

Clearly things did not go according to plan. While the Conservatives won 318 seats compared to Labour’s 262, it is still short of the 332 seats required to give them an effective majority. As a result, Mrs May is now considering a deal with Northern Ireland’s Democratic Unionist Party (DUP) to bolster her support.

 

So why has this happened and what does it mean for the property market?

While there has been criticism of Mrs May’s style and the way in which the campaign was conducted, there were two key factors which appear to have tipped the scales, says Matt Lavin of Benoit Properties.

“The results are a sign that voters do not want a ‘hard Brexit’, which would see Britain making a clean break with the EU and losing its access to the Single Market.

“The other key factor is that Jeremy Corbyn – with his vision of a fairer Britain – has been highly successful in mobilising younger voters, including many Millennials whose inability to afford to buy their own homes has earned them the title Generation Rent. It could be that their sense of frustration has spilled over.”

While Mrs May remains Prime Minister for now, few believe that she will remain party leader for long and there is talk of another election before the year is out.

“Whatever happens, there will be some uncertainty in the short term,” says Matt. “However, with many business leaders having been concerned about the impact of a hard Brexit on the economy, there is also a feeling that the government will now have to soften its line, which could result in a more positive outcome from the Brexit talks for the UK in the longer term.”

While the housing market has shown signs of a slowdown in the past two to three months, which has been blamed on election uncertainty, a less crowded market offers opportunities for investors. Similarly any further falls in the pound will make UK property more attractive to overseas buyers.

In their housing policies outlined before the election, both Labour and the Conservatives promised to build a million new homes as part of their plans to tackle the country’s housing crisis. Labour also said it would build 100,000 new council homes a year as part of this target, create a Department for Housing and a new generation of new towns as well as investment in infrastructure.

Meanwhile the Conservatives also promised new social housing but with no set number or timescale, and said they would reform compulsory purchase to enable councils to buy up derelict land.

“There now appears little hope of real action to tackle the UK’s housing crisis,” says Matt. “With no clear majority, it will be difficult for either party to get new measures through Parliament. Then there are the practical issues – where will the money come from and, if the Conservatives plan to restrict immigration, what about the labour to build them?  These are real barriers and both parties’ policies are short on details.

“Successive UK governments have built too few homes and now it will take years to make up the shortfall. One thing is sure – with housing demand far outstripping supply, UK property looks set to remain a sound investment for many years to come.”

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