We have seen a change of government, change of Brexit strategy and it now looks as though UK interest rates will go further down before they rise. There is political mayhem, talk of a minority government and a Labour Party ready to step in with a temporary administration. So, what are the main influences on the UK property market and what should we be expecting in the short term?
It looks as although the “Boris bounce” has flatlined, Jeremy Corbyn has become one of the most diverse of potential prime ministers in UK history and the devolved parliaments are literally fighting their own corner. What a change from the summer of 2016, the formality of an EU referendum, the chance to move on and close down UKIP and Nigel Farage once and for all. Fast forward three years, petty infighting, no leadership in the Houses of Parliament and a UK property market which is starting to flounder.
These are the kind of situations when our Canadian cousin Mark Carney should be stepping forward as governor of the Bank of England. However, he has a history of flip-flopping in a very short space of time, changing his mind and giving different signals to the market. Like a cat on a hot tin roof he is jumping from side to side, lifting his head above the parapet once in a blue moon and giving little if no direction for the UK economy. So who can save the economy?
Seen as the devil incarnate by many politicians, as they look to curry favour with voters, property investors have held the UK property market together. Deflating the London bubble, while inflating regional markets, has seen a significant swing in prices away from the capital. The HS2 project is going to be game changer (when it is finally finished!) with the chance to travel between Manchester and London in just over an hour.
Property investors are picking and choosing their investments, like a poker player studying the table, with a greater emphasis on rental yields as opposed to flat out capital growth. With UK interest rates lower than a snake’s belly, rental yields approaching double digits in some places, current accounts and savings accounts are not popular with property investors.
Remainers v Brexiteers
The big battle seems to be between Remainers and Brexiteers with each side claiming the backing of the UK public even if the vote was to leave the European Union. We have seen the emergence of new political parties, like a phoenix from the flames, with divisive figures such as Boris Johnson and Nigel Farage coming to the fore while Remainers continue to claim that the UK public has changed its mind. Even though the noise may be coming from the Remainers side, history shows that it is often the quiet majority who can swing polls either way.
It is also worth noting that Brexiteers have been the subject of numerous untrue and unhelpful slurs which has forced many to go back underground, for the moment.
Follow the money
While they followed the “Yellow Brick Road” in the Wizard of Oz, property investors today are following the money. We have seen disinvestment from London, reinvestment in places such as Manchester, Birmingham, Leeds and other regional markets. Long forgotten high yielding rental properties are now back in vogue, capital appreciation is seen as a bonus and not the first goal. There is also a feeling that property investors are simply treading water before markets return to “normal”.
So, the politicians can shout, scream and yell from the rooftops, but property investors are in control of the property market with overseas investors having a greater influence in light of sterling’s weakness.