17 May General Election; how will this affect the property market & what are its prospects post election?
Theresa May’s decision to call an election on June 9th caught the financial and property markets by surprise.
Markets generally hate uncertainty and the property market is no different. Until the election we predict some discretionary sellers may hold off putting their properties on the market until after the election. Stock is already at record lows. However, with around 4 weeks to go until polling day there will be much less time than usual for hesitancy to build and there is likely to have less effect on house prices than a standard general election. Spring also tends to be a particularly busy period for UK housing market with the number of sales climbing from February to June. The volume of transactions usually bounce post election and if the council elections are a guide, a substantial Conservative majority may well lead to a strong property market for the remainder of the year.
One potentially positive impact of the election on the property market is that half of the Finance Bill has been put on hold until after the General Election, including a raid on dividend incomes and an overhaul of the non-dom rules. It is also significant that measures to charge inheritance tax on UK property held in offshore trusts was also postponed. If the government rethink their policies on trying to extract the maximum amount of tax from foreigners and non-doms investing in UK property, this could encourage more foreigners to invest in UK property with the positive knock-on effect on the economy by:
- Increased spending
- VAT receipts
- Local goods and services
Annual house price growth in London slowed to 6.4% in January according to Hometrack. Whilst this is the lowest level of house price growth for some time, it is interesting to note that growth is still in positive territory. House prices are rocketing in Bristol and Oxford, where house prices grew by 9.7% and 9.2 percent respectively year-on-year in January.
The main uncertainty overhanging the market is not the election result but the outcome of the UK’s negotiations with the EU.
Can a trade and immigration deal can be struck leading to a smooth Brexit?
It is likely that Theresa May’s negotiating position will be strengthened by a strong mandate from the voters but the election of Emanuel Macron in France will not make May’s negotiations any easier.
As a staunch pro-European former Rothschild banker, he is thought to be keen to attract financial services businesses to Paris.
Our forecast remains that property prices will remain broadly flat this year with an increase in transaction volumes after the election, assuming a decisive Conservative majority following their strong showing in the recent council elections.
At Walton Estates, we have seen several of our properties go under offer in recent weeks with an exchange of contracts on a large block of flats in Chelsea; we are optimistic that there will continue to be a good market for properties that are sensibly and accurately priced.
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