As we wake up today to a hung parliament the Conservatives are looking to put together a “supportive” government with the DUP. There is obviously a strong connection between the two parties with regards to the UK union but there are some aspects of the DUP which will not sit comfortably with some Conservative MPs. However, in light Theresa May losing her overall majority in the Houses of Parliament she has few options and the DUP seems to be the only real chance of forming a government.
What does this mean for the UK property market?
There is no doubt that a hung parliament is the worst case scenario for any investment market and it will take some time for investors to get their head around this issue. How it will impact the UK property market is open to debate but a number of subjects have been mentioned including:-
Markets dislike uncertainty
All investment markets deeply dislike uncertainty because it makes a difficult if not impossible to value assets. If they know the best case scenario or the worst-case scenario then assets can be valued accordingly but uncertainty breeds uncertainty and will likely see the UK market come under some pressure in the short term as buyers head for the sidelines. The UK politicians will need to step in and inject some kind of stability into the UK property market sooner rather than later.
There is no doubt that markets deeply dislike uncertainty but the recent history of the UK property market against the political arena tends to show significant resilience. The fact that the UK property market has softened over the last few months, ahead of Brexit, does not help the situation but many experts do not believe we will see any significant downside – unless there are major political repercussions such as the arrangement with the DUP collapsing.
Projects put on hold
Do not be surprised to see an array of new projects put on hold in the short to medium term as the UK comes to terms with not only a hung parliament but also what will be difficult Brexit negotiations. If you were a large investor would you feel comfortable investing in this economic and political environment? The simple answer is no, at least not until the UK political arena has settled. Over the next few days we will see much jockeying for position amongst political parties with a reinvigorated Labour Party set to take on the Tories.
As some projects are put on hold we will likely see a slowdown in the construction sector which is an integral part of the UK economy. This will have a knock-on effect to other connected business sectors so, as we mentioned above, it is imperative that political figures step forward with calming policies as soon as possible. We have all seen the dangers of a slowing construction sector and how difficult it can be to turn things around.
When Theresa May called a snap election just a few weeks ago it looked as though it would be a stroll in the park for the Conservative party. Polls at the time put them up to 24 percentage points ahead and the Labour Party seem to be heading in one direction. However, a number of mishandled policy announcements, an inability to connect with the public and renewed support for Jeremy Corbyn have put the Conservative party on the back foot.
Uncertainty is the worst thing for any investment market therefore the UK property market could come under pressure in the short to medium term. On the upside, a fall in the value of sterling will certainly attract some overseas investors who could to a certain extent offer support to the UK property market. Uncertain times ahead………..