By Alpa Bhakta, CEO of Butterfield Mortgages Limited
With the new year in full swing, now is an opportune moment to take a step back and understand how the current political and economic landscape will shape the property market in the coming months. While the future can never be fully predicted with absolute certainty, examining current political trends can provide some indication of what investors could expect in 2020.
The Conservative’s manifesto, campaign promises and success in the December election go some way toward indicating where the UK may be headed. Boris Johnson’s promises were surprisingly succinct: more investment in public services and concluding the Brexit process.
The latter coming to pass would be a relief to business leaders. The past three years of delay, tension and hostility have had a frustrating effect on the economy and the pound, leading to a loss of confidence and investors opting for a “wait and see” approach to their investment strategies. This was a trend seen particularly in the real estate space, leading to modest house price growth. In October 2019, according to Nationwide, house prices had grown by less than 1% for 11 months.
It is little wonder, therefore, that property leaders have been calling out for one thing: certainty. Thankfully, there is cause for some optimism. The December 2019 general election delivered a majority government, reducing the chances of political deadlock in Westminster when passing legislation. Whatever your political leanings, this should amount to greater consistency―and fewer elections―than has been seen since the EU referendum result in June 2016.
For the property market, the effect of the election result is already being felt, with a sense of burgeoning positivity. Analysis from Savills suggests that prime central London property could rise by as much as 3% in 2020.
Positivity and price growth may also result in improved housing stock as latent sellers emerge. What’s more, it could also contribute to greater market liquidity―good news for those trying to acquire or sell real estate in the capital. But, with the Brexit process still very much underway, there is still plenty of uncertainty about what the future 12 months could bring.
However, I have two predictions I believe look likely to transpire in the immediate future.
Firstly, and perhaps most importantly, there is likely to be growing transactional activity in the property market as a consequence of the fluctuating pound sterling. This has been caused by Brexit uncertainty and the election, but with the latter concluded and the blueprint for the UK’s future political arrangement with Europe becoming slowly clearer, the value of the pound could recover. For investors and buyers from outside the UK, favourable exchange rates offer greater purchasing power at the moment, and so they may be well-served to maximise on this current state of affairs early in the year.
Secondly, while newfound buoyancy is likely, there is still a sense that buyers will remain somewhat cautious in the opening months of 2020. While the government is clearly making headway, Brexit is by no means resolved. We must be prepared for months of political negotiations as the final details are confirmed between London and Brussels.
Other things to look out for in 2020 include mooted changes to stamp duty. During the 2019 general election campaign, the Conservative party said it would consider implementing an additional stamp duty surcharge on non-UK residents buying UK property. There are no clear details as to how this would be managed, however the upcoming budget scheduled for mid-March should provide an update on the government’s position.
In summation, 2020 looks set to be an eventful year for those in the property space. With uncertainty finally receding, it is at the very least reassuring to see a majority-led government in power. It not only reduces the chances of Westminster being caught in a political deadlock, it also ensures that progress on Brexit can be made. When it comes to real estate, the market has been calling for certainty and leadership, and 2020 could be the year these two factors are delivered.