The great British public seem to be getting very good at delivering surprises. In the 2015 election, pollsters expected a hung parliament and saw the Conservatives achieve a narrow, but workable, majority. In the 2016 referendum, pollsters expected remain and saw leave achieve the narrowest of wins. In the 2017 election, pollsters expected an increased Conservative majority and instead saw a hung parliament with the Conservatives losing ground and the “unelectable” Jeremy Corbyn emerging as a respected figure in national politics. Here are our thoughts on what this means for the UK housing market.
Buy to let
Overall buy to let currently remains a viable investment, but it has certainly become a more challenging one for small-scale investors to navigate. Tax changes, regulatory changes and changes to the mortgage market combine, to place a potentially heavy burden on private individuals and it is impossible to rule out the possibility that there will be more unwelcome changes in the future.
While the Conservatives are generally sympathetic to private enterprise, they may struggle to make good on their manifesto promise to build 1.5 million new homes by 2022 (of which 1 million were to be completed by 2020) and may therefore attempt to make life even harder for BTL landlords in an attempt to push them out of the market and free up housing stock for sale, or, alternatively, to regulate the market in a way which reduces yield.
Labour has already suggested confiscating unused private houses to provide social housing and if the current government collapses, a Labour government could be a real possibility. In this context, it is very likely that small-scale investors well be deterred from entering the market and existing small-scale landlords may decide to make a graceful exit from it.
Since the UK will probably still have a high demand for rental accommodation, the corresponding vacuum is likely to be filled by larger companies, possibly financed (at least in part) by former small-scale BTL landlords who still want to be involved in the market.
Commercial rentals
Even though the plight of small businesses can make news headlines, overall the commercial rental market tends to be of much less interest to the press than the residential buy-to-let market. Likewise, a look at the various party manifestos shows a clear focus on residential housing and nothing comparable about its commercial counterpart, hence commercial property could be a welcome refuge for investors looking to avoid politics and focus on yield. As an added bonus, commercial property investment can be undertaken by means of funds, which opens the door to small-scale investors.
Property development
All the main parties made some sort of commitment to home building, but whether or not any of them will be able to make good on it remains to be seen. The simple fact of the matter is that uncertainty is bad for governments too.
Uncertainty about tax revenue makes it hard to plan ahead and likewise uncertainty about the supply of workers (given that the construction industry has long depended on trades people from A10 countries) can make it hard to predict accurately how much a project will cost and/or how long it will take. That means it’s very likely that government-funded projects will slow down or be mothballed. It also means that traditional lenders may be reluctant to finance construction projects. Hence, there could be some exciting opportunities for private investors to fill this gap.
Author Bio
Hopwood House are property investment specialists, with a large portfolio of investment opportunities in the UK student property and buy-to-let property investment markets.
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Daniel Peacock