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As the UK heads to the polls, we preview where the main parties stand on key housing issues – and what property investors need to know.
On Thursday 12th December 2019, the UK will hold a general election.
For the second time in two and a half years, the British public will cast their vote for which party they want to form a new government.
Where do the main parties stand on key housing issues? Which party is likely to win? And how will the outcome impact on the UK property market?
We’ve previewed the 2019 general election with a particular eye on what to look out for as property investors.
On Thursday 31st October, the Early Parliamentary General Election Act 2019 received formal approval by Queen Elizabeth II and came into force immediately. This followed a successful passage through both the House of Commons and House of Lords over the previous two days.
Parliament was officially dissolved on Wednesday 6th November, consequently beginning the five-week election campaign period.
Talk of an early general election was rife amongst UK political analysts throughout most of the year. When Boris Johnson succeeded Theresa May as Leader of the Conservative Party and Prime Minister in July 2019, he unsuccessfully attempted to call an early election on three occasions.
By October 2019, with the UK forced to request the European Union (EU) to extend the Brexit deadline until 31st January 2020, a call for an early general election by the Conservative government received a majority vote in the House of Commons.
With the Brexit deadline having been extended on three occasions, many politicians agreed to a general election as a means of asking voters how best they want to resolve the current deadlock, and which party they want to lead the country forward as Executive in Parliament.
Of course, Brexit is not the only issue in the election. Indeed, many of the debates in the early weeks of the campaign have centred around other national issues; the National Health Service, taxes and the environment. However, Brexit is expected to be the central theme of the 2019 general election, with many commentators viewing this election as a ‘proxy referendum’ on whether the country backs a party promising to ‘get Brexit done’, or one which promises to pause the process, seek a new deal, put it back to the people for a confirmatory referendum – or even maybe cancel the whole idea.
Largest (by MPs in the last Parliament)
Leader: Boris Johnson
Leader: Jeremy Corbyn
Scottish National Party (SNP)
Leader: Nicola Sturgeon
Leader: Jo Swinson
Democratic Unionist Party (DUP)
Below we’ve focused on the issues to be of most interest to UK and overseas-based property investors. These are pledges made by each party in their 2019 general election manifestos. At this stage, these are only pledges. Should any of the parties win a majority and go on to form a government, there is no guarantee these pledges will be passed unchanged as new legislation – or how quickly. However, it does give a good indication of intent on behalf of each of the main parties.
(Note: The SNP is a Scotland-only party, meaning candidates only stand in constituencies in Scotland. Voters in England, Wales and Northern Ireland cannot vote for the SNP. While the SNP plays a significant role in the wider UK political landscape, we have only looked at the manifestos for the three largest parties which have candidates standing in the whole of the UK).
Since the largely unexpected result of the 2016 EU referendum – and the election of Donald Trump as US president – many analysts have been wary of taking pre-election opinion polls as concrete proof of a definitive outcome.
In 2017, it was YouGov’s MRP poll that came closest to predicting the unexpected general election result, which saw Theresa May and the Conservative’s lose their majority.
At the time of writing, the MRP poll predicts a 68-seat majority victory for Boris Johnson and the Conservatives. However, this was published on 27th November, a full 14 days ahead of the 12th December election date. Therefore, it would be unwise to trust this prediction entirely.
We should also be prepared to see a ‘hung parliament’ result, which would most likely see either the Conservative or Labour party winning the most seats.
A hung parliament is when no political party secures a majority victory at a general election.
In this event, one of the most likely outcomes is a minority government being formed.
Boris Johnson would remain as prime minister and would have the first opportunity to try and form a government with support from smaller parties or independent MPs. In the 2017 hung parliament outcome, Theresa May and the Conservative party went on to form a minority government with the support of Northern Ireland’s DUP party.
However, Mr Johnson would be expected to resign if it became clear that he would be unable to secure enough support to form a government. This would then give Labour leader Jeremy Corbyn the next opportunity to form a coalition government.
In 2019, any potential hung parliament is likely to see either the Conservatives or Labour seeking support from parties such as the Liberal Democrats, the SNP or the Brexit Party. This could become significant, as any of these parties would likely only agree to going into a coalition on the basis that one, or several, of their own key manifesto pledges be carried out in government.
Fundamentally, property is renowned for its resilience. Unlike alternative investments, such as stocks and shares, property performance is not heavily dictated by wider political and economic factors.
So yes, regardless of the election results, investors shouldn’t be wary about buying property in the UK – and can invest with confidence.
Election manifesto pledges may or may not happen
Again, it’s important to remember that any pledge made in an election manifesto isn’t guaranteed to be carried out in government.
The UK still has a critical undersupply of property
Regardless of the outcome of this election, the UK simply doesn’t have enough property to keep up with current demand levels. This has not changed – nor is likely to change any time soon.
Demand for property in England alone is two to three times the level of supply. In key regional cities such as Manchester, huge economic growth is driving job numbers in the city centre. Yet, while 11,000 new jobs will be created in the city centre between 2018 and 2022, just 4,000 new purpose-built rental homes will be built during this time.
It’s a similar story in the UK’s student property sector. Britain’s world-renowned universities continue to attract the world’s brightest international students; the appeal of a UK education is enduring. And, with student numbers rising, so too is the demand for accommodation, particularly the purpose-built student accommodation (PBSA) sector. PBSA represents around 30% of full-time first-year undergraduate housing choices, up from 22% five years ago. But, in key university cities such as Cardiff, there are 2.5 students for every 1 PBSA property available.
The pound is still relatively undervalued
Since the Brexit vote in 2016, the pound has suffered several significant falls against the value of the US dollar. Compared to its value on the 23rd June 2016, the pound is now 15% lower against the greenback (rate calculated on 28th November 2019). This means, for overseas investors, you can save $48,652 on a £250,000 UK property compared to three-and-a-half years ago.
With an election and upcoming Brexit deadline likely to see further fluctuations in forex rates, there is still a huge currency window of opportunity for international buyers.
Take advantage of a quiet market!
Traditionally, the UK property market sees a slowdown in buying and selling activity around the time of an election. This is usually attributed to people wanting to wait until after the election result before deciding whether or not to make a move in the market.
This trend has emerged once again for the 2019 general election. According to Rightmove, there has been a 14.9% fall in the number of new properties coming onto the market in November, compared with 12 months previous. This is the largest slump in new supply in any month since August 2009, further squeezing the UK’s already sparse level of property supply.
With the election falling just two weeks before Christmas, another period traditionally associated with a slowdown in transactions, this adds a further layer of quietness to the market currently.
Once both the election and Christmas have come and gone, there is likely to be a spike in activity, which could also have an impact on average property prices.
Therefore, does this present an immediate opportunity for investors to make their move now and achieve the best level of value in the market?
(This is an opinion-based article ahead of the UK general election. Select Property Group has made every effort to ensure this story is free from any political bias).
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