Scotland, Millennials, Developers And Housing: The Winners And Losers From The U.K. Election
The U.K. General Election produced a surprise hung parliament with no overall majority. So who were the winners and losers in the real estate world?
1. Scottish property
Scottish Nationalist Party leader Nicola Sturgeon said she will not seek a second referendum on Scottish independence, following the vote in 2014, as a result of her party's loss of seats in the election.
While a second referendum did not occupy the minds of investors as much as Brexit, it had been seen as a drag on investment appetite in the country.
“In reducing this uncertainty, real estate assets north of the border should benefit,” M&G Real Estate Head of Property Research Richard Gwilliam said.
2. Germany, Paris and the U.S.
Germany already outperformed the U.K. in terms of investment volume in the first quarter of 2017, according to Real Capital Analytics, the first time that had happened in more than five years. The shift from the U.K. to the Continent is likely to be even more exaggerated now, especially for Paris and Germany. In spite of its own political turmoil, the U.S. will also benefit from a reduced appetite for U.K. real estate.
3. Asian high-net-worth investors
Asian high-net-worth investors and private property companies have maintained a hunger for London offices through the recent turmoil. The 12% fall in the value of sterling against the dollar in the past 12 months has made U.K. assets more attractive to companies like C.C. Land, which bought the Cheesegrater for £1.15B this year. The election result and attendant uncertainty means the pound is likely to remain depressed for the foreseeable future, and retain this currency-based discount.
The surprisingly high turnout from younger voters has been a major factor in the Conservative party losing its majority. This is already an important demographic for real estate, with every sector fighting for its attention and approval. For a long time politically ignored, now they will have their voice heard, and expect their influence to grow even greater.
1. Developers and secondary property owners
South African bank Investec outlined Friday morning how lenders are likely to pull back from new development lending because of the uncertainty the hung parliament will create in leasing markets. The same will also be true of investor appetite for assets that require leasing up or refurbishment, which were already starting to re-price before the election.
2. Investment brokers
In general, investment brokers do not mind whether a market is going up or going down, they just need a clear direction of travel so there is a churn among owners. The complete lack of clarity over Brexit, the economy and even the stability of the government will put investment decisions on hold for longer and lead to a moribund sales market.
3. The housing agenda
Among all the noise about Brexit and hung parliaments, other areas of debate in the U.K. economy will inevitably be sidelined. This is especially true of housing since the Housing Minister lost his seat in the election. But in the U.K., housing has become a major factor in determining economic prosperity and ability to save. Lack of affordable housing to buy or even rent was likely a key factor in the increased turnout among younger voters and the swing away from the Conservatives. To put it on the back burner would be to miss the wood for the trees.