UK Prime Minister Theresa May has surprised the country with an announcement of her intention to call a general election on the 8th of June. In her speech, she argued that calling an election before Brexit negotiations begin in earnest will give the country more stability and certainty.
Many have accused May of wanting to capitalise on her current high poll rates—but whatever her motivations, and whatever the result, the announcement has already influenced the market. And those looking to either purchase residential property or invest in the UK may be concerned.
Some analysts believe that a pending general election could slow the UK property market. Naturally, election periods create an element of uncertainty. However, with the election due to take place on the 8th of June, this period of instability will be relatively short. The market in general has been slow recently, due to changes in stamp duty and buy to let lending, so attributing this to the election may not be fair.
Current polls also suggest that May will lead the Conservative party to a landslide victory, achieving a significant parliamentary majority in the process. Of course, the situation could change and the polls have been wrong on many occasions—but early signs show the financial markets are also backing May to win, and provide the stability she has promised. In the immediate wake of her announcement, Sterling had already rallied. This is likely because if the Conservatives win and gain a parliamentary majority, they will be in a better position for Brexit negotiations.
So what about investors? It’s easy to panic, and imagine that an impending election will put off investors looking to buy in the UK—but a recent survey on investor intentions from the CBRE showed that this wasn’t the case in Europe, and therefore might not be in the UK. Although there was ‘some nervousness about the elections in France, Germany and the Netherlands’, this ‘did not seem to have dampened appetite for real estate.’
The CBRE research also revealed that only 4% of investors cited ‘local political instability’ as a main concern when considering where to invest in 2017. Even ‘global political instability’, which covers conflict and terrorism, was only a primary concern for 6% of investors. Instead, investors are much more likely to be concerned by a ‘global economic shock’ and ‘faster than expected interest rate rises’.
Therefore, although it might slow the market slightly, the election shouldn’t be a reason in itself to hold off on potential purchases—if Sterling continues to recover, this may even motivate international investors to purchase whilst foreign exchange rates still benefit them. Whatever the result, Enness will continue to work to keep you abreast of current news and offer tailored advice for your financial situation. If you’re currently considering purchasing or investing in the UK property market, contact us for a further discussion of how we can help you.