UK General Election 2019: Implications for Real Estate

Key property-focussed pledges in the manifesto (the full copy of which is accessible here) are to:

1. Increase home-building, with a target of 300,000 new homes a year by the mid-2020’s and one million new homes over the next five years;
2. Simplify the planning system for the public and small builders and support ‘modern methods of construction’;
3. Amend planning rules to ensure that infrastructure is built before any new homes are built;
4. Introduce a new stamp duty surcharge (indicated to be 3%) on non-UK resident buyers to fund rough sleeping programmes;
5. Encourage home ownership by offering a new market in long-term fixed rate mortgages with low initial deposits;
6. Offer more homes to local families, allowing councils to use developers’ contributions via the planning process to discount homes in perpetuity by one third for local people who cannot afford to buy in their area;
7. Simplify shared ownership products;
8. Ban the sale of new leasehold homes;
9. Restrict ground rents to a peppercorn; and
10. Abolish section 21 (Housing Act 1988) ‘no fault’ evictions and implementing single ‘lifetime deposits’ to create a fairer rental market for tenants.

Memery Crystal Comment:

The result provides welcome relief for investors who had adopted defensive plans in 2019 as a coping mechanism when faced with election uncertainty and the prospect of a hung parliament. This was reflected in investment volumes in the first three quarters of 2019, down 50% compared to the same period in 2018.[1]

In this regard, 2020 looks to be a positive year for UK real estate according to Richard Divall, Head of Cross Border Capital at Colliers International as many investors reinvigorate their purchasing plans, returning money to the attractive UK market and increasing liquidity for transactions in anticipation of reversing the previous year of low volumes.[2]

Developers will take note of the government’s commitment to driving up the numbers of new build homes for sale and for rent and ought to benefit from changes to planning rules. Many developers who have held off signing contracts until a clear result was confirmed are now likely to renew their appetite for new schemes given the strengthened market certainty.

Whilst the newly elected Government will inevitably be focussed in the short term on formalising the UK’s departure from and future relationship with the EU, the property-related pledges provided by the government, backed by one of the strongest majority results in years, indicates the potential for a positive, active 2020 for investors, developers, landowners and tenants alike and represents some much needed opportunity and stability in the sector.

[1] Source: Real Capital Analytics

[2] Source: Bisnow.