We wake up this morning with the news that Boris Johnson has secured a very healthy majority in the House of Commons. This result has been welcomed by property investors and private landlords across the country amid concerns that a Labour government would have decimated the sectors. As a consequence, many of the controversial policies discussed in the general election are now no more. So, what might a Conservative government do for UK property investors?
There is no doubt that UK economic growth in the short to medium term will be challenging to say the least – but more likely under the Conservatives than Labour. We have the spectre of Brexit and the ongoing constitutional crisis with the Scottish government. Whichever way you look at it, there will be significant upheaval in the short, medium and longer term although let’s not forget the potentially lucrative opportunities to reshape the UK economy. The fact that the UK economy avoided slipping into recession, during what has been the most difficult economic period for some time, says everything about the underlying strength.
Even though the Conservative government has no say in the Bank of England’s base rate policy we are unlikely to see an increase in interest rates in the short to medium term. This will create a very favourable climate for investors. Indeed there is a suspicion that interest rates in the UK could even move lower if we are faced with a no deal Brexit towards the end of 2020.
It is also worth noting that many traditional banks are awash with excess capital in their mortgage divisions. Under new regulations they are not allowed to transfer these funds to their investment banking divisions as they have done in the past. So, in their quest to secure a return on this excess capital we will likely see further competition in the UK mortgage market.
No new taxes
The UK property sector has come under extreme pressure in recent times. Often made a scapegoat in front of the general public, many property investors decided to sell-up and leave the sector. While unlikely that the late flurry of property related regulations passed by Theresa May’s government will be reversed just yet, we are unlikely to see any new regulations. There are high hopes that Boris Johnson will restore some of the previous tax breaks afforded to investors, not just in real estate, but time will tell.
No rent controls
Rather bizarrely, many people have campaigned in favour of rent controls amid suggestions that they actually secure steady long-term returns for investors. There are various rent control areas across Europe many of which would appear on the surface to have performed admirably. However, if you strip away the emotion, and look at the plane hard facts and figures, if you reduce the amount of rent that can be charged then surely you reduce the overall return? It is not difficult to see why many private investors have decided to call it a day over the last couple of years!
No right to buy (private sector)
Many people were surprised to see the Labour government even discussing a right to buy policy for tenants in the private sector. The suggestion that private investors would be forced to hand over their properties to long-term tenants, choosing to take up their right to buy option, caused uproar. However, this was the intention of the Labour party, creating discord amongst the UK population and ultimately leading to attacks on capitalism. In reality, it was rather ironic that the Labour party was looking to introduce the right to buy for private properties which must surely be classed as a type of capitalism?
It looks as though the new UK government will manage the economy in a fashion more in line with private investors. The last few years have been challenging to say the least but many property investors are now slowly making their way back to the side of the road and looking from a distance. It will be interesting to see whether Boris Johnson repeals some of the more recent statute book entries which were certainly not designed to favour property investors.