The UK’s political landscape has changed considerably over the course of December and January. The election provided the Conservatives with a large majority, Boris Johnson being then able to pass the Brexit Withdrawal Bill.
With the Brexit deadline almost certain to be met by the end of January, there is now a sense of a fresh start. For investors, this is because uncertainty is slowly creeping away, allowing them to act more positively than was possible in 2019.
However, a feeling of optimism can come to nothing without action. In the property sector, the need for change and new policy is significant. With this in mind, it’s worth considering what events and trends the sector can expect to see this year.
Preparing for Brexit and the Budget
There is now an overwhelming consensus that the first part of Brexit will be completed by the end of this month. Regardless of your political stance, this is likely to come as a relief. The prevarication and hostility of the past three years has engendered uncertainty and political fatigue, but there is now a sense the country will be able to move on.
Six weeks after the Brexit deadline passes, the eyes of the country will turn to the Chancellor as he delivers 2020’s first financial statement — the Spring Budget.
Sajid Javid was meant to deliver a financial statement last autumn, however it was ultimately postponed due to the election. For business leaders, who needed leadership in trying market conditions, this was frustrating.
It is now time for a statement-of-intent from the Government on its domestic agenda and how it aims to tackle the biggest problems facing those of us involved in the property market. With a significant majority and the main bulk (in the short term, at least!) of Brexit having been dealt with, Boris Johnson now has the breathing room to lay out his agenda — whether that be reformist or otherwise. Regardless of the politics, there is no time for further delay.
After the Brexit and Budget have come and gone, the remainder of 2020 will be much easier to predict. In the meantime, though, what can those in property expect?
Experts predicting good growth
The supposed ‘Boris Bounce’ was arguably overstated in the days following the election, but according to Rightmove, prices rose in December faster than any other month in 2019. Looking forward there is a sense that renewed political certainty should foster healthier growth.
Indeed, Savills is predicting that the prime central London (PCL) market could grow by as much as 3% in 2020. According to Nationwide, by last October, the UK had seen 11 successive months of growth under 1%, so this would be a welcome improvement.
While the domestic agenda may not yet be clear in its entirety, the Government does have some inbound tax changes already lined up. Capital gains tax is set to see some significant technical changes that are well worth being up to date on. They will impact the timing of when the tax bill is implemented, how much relief can be claimed, and also outline how letting relief will operate.
It’s not a minor change, either. From April onwards, those who have sold an asset will have to pay the bill within a month, not at the end of the tax year. For those engaging in any kind of major sale, this could have a large impact on cash flow.
Housebuilding to be re-prioritised
The housing crisis has been a scourge on successive governments of both stripes, but more importantly, it is also having a profound impact on all areas of society.
Bold targets have been regularly been missed, and the growing number of homeless people and the number of people who want to get on the property ladder but cannot should be a major cause of concern for Boris Johnson and his team.
His party remains committed to its promise of delivering a million new homes by the end of the current parliament in 2025, but the drastic policy and investment needed to get there has not yet been enacted.
Therefore, the attention should once again be on Sajid Javid and the Spring Budget. Will he, for example, promise investment in developers, helping to inject life into the market? Will he encourage foreign investment by avoiding punitive surcharges on overseas buyers? Only time will tell.
At Market Financial Solutions, we offer specialised financial products that are able to help those in property reach their goals, contributing to a healthy property space. The Government must now also make this its priority, and I look with interest to the coming months to see if it will do so.
Paresh Raja, CEO, Market Financial Solutions
Paresh Raja is the founder and CEO of Market Financial Solutions (MFS) – a London-based bridging loan provider. Prior to establishing MFS in 2006, Paresh worked as a senior professional consultant in one of the top five management consultancy firms, and also set up an independent investment group.