UK ELECTION: PROPERTY INVESTORS’ GUIDE.
As the UK settles into another five years of Conservative leadership, we look at the pre-election pledges that all UK property investors should be aware of.
Housebuilding
The Conservatives plan to support a surge in housebuilding to tackle the UK’s major housing shortage, aiming for 200,000 new homes for first-time buyers and 275,000 additional affordable homes by 2020. This goal will be supported by a four-year, GBP1 billion brownfield regeneration fund.
Despite these ambitions, a number of structural issues will continue to put the brakes on residential construction. From soaring delivery costs to a shortage of skilled workers to deliver new developments and bureaucracy holding up planning processes, there are key issues that need to be addressed over the long-term to solve the country’s chronic undersupply situation.
In the meantime, investors can expect the ongoing housing shortfall to continue driving price rises.
Encouraging homeownership
Taxation is always a hot election topic and inheritance tax cuts formed a major element of Cameron’s manifesto. Under the plans, parents will be able to pass on property worth up to GBP1 million to their children without paying this tax.
Meanwhile for aspiring homeowners, a number of plans, particularly in support of first-time buyers, have been outlined. Chancellor George Osborne’s Spring Budget announcement included pension reforms to enable retirees to invest in property, while the Help to Buy ISA will help first-time buyers get on the property ladder. Meanwhile an extension of the Right to Buy policy is set to allow 1.3 million housing association tenants the opportunity to buy their homes.
Any support for the UK’s culture of home ownership should be seen as good news by investors. With yet more buyers receiving a helping hand to purchase property, these measures will contribute to increasing demand and can therefore be expected to drive further future price growth.
Regional development
A significant priority for the Cameron government will be building national unity while driving greater fiscal devolution. London is expected to continue to grow its status as a leading global magnet for foreign investors, but regions outside of the capital are also set to benefit from greater control of local tax revenue and decision-making.
The Spring Budget confirmed the Conservative party’s commitment to its Northern Powerhouse vision, with Manchester handed the right to retain increases in business rates revenue. This move is expected to drive the delivery of city-specific infrastructure and regeneration plans, creating more opportunities for private and overseas investment. Read our Manchester Market Update for more about the city’s investment case.
As capital flows into the UK’s second-tier cities and regions, new pockets of value will emerge (see fig.1), offering promising opportunities for property investors.
Investor confidence
We can’t yet be sure which of these pre-election pledges will turn into post-election commitments, but overall the sentiment is very positive for property investors.
At the time of writing, the Conservatives were on course to win by a narrow majority. Once the results are formally confirmed, the Prime Minister will move swiftly to form a government over the coming days. With this certainty will come a renewed confidence from investors amid a familiar and therefore more transparent policy climate. There are also signs that interest rates will stay low as the Bank of England’s current trajectory remains in place. The prospect of economic growth momentum and stability is good news for investors.
In the short and long term, the election result is likely to support the stability and viability of the UK as a property investment market, and we therefore expect the country to retain its status as a safe haven for overseas investors for years to come.
simon.roberts@ipglobal-ltd.com
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