Media outlets around the world continue to pick up on the fact that UK political chaos seems to be having little or no impact on the UK property market. A recent article in the South China Morning Post gives a very interesting insight into the UK property market and the prospects in the short to medium term. It would appear that UK investors are the most sceptical about UK property but then again for foreign investors they will be enjoying the benefits of a 20% devaluation of sterling. So, how does the outside world see the UK property market and the UK political arena?
Plans for newbuilds unchanged
It is common knowledge that the UK property market is running literally tens of thousands of newbuilds behind the required numbers. This is something which has been going on for decades amid concerns that new build numbers are being held back to support current property prices. However, whether the Labour Party had scraped through with a minority government or, as we have seen, the Conservatives have managed to put together a loose coalition with the Democratic Unionist Party, the need for more new builds remains unchanged. So, while the Conservative Party may be forced to scale back austerity measures and withdraw some of their manifesto policies there will be no change in any political party’s housing policy.
As we have touched on in numerous articles, while the pound has recovered slightly of late it is still well down on the world’s major currencies over the last 12 months. A near 20% “devaluation bonus” has not gone unnoticed by some of the world’s leading real estate investors who are now targeting the UK. We sometimes forget that the UK property market is extremely diverse and not always focused upon capital gains. As a consequence, it is possible to lock in double-digit rental yields in some parts of the country which offer very strong long-term rental income streams. At some point there will be capital appreciation but in the meantime the income streams will more than make up for a lack of short-term capital appreciation.
Whether you believe there’s a difference between Brexit, soft Brexit or hard Brexit, the UK government will need to rein back some of its earlier demands due to a diminished power in the Houses of Parliament. In the end this could even mean allowing limited movement between Europe and the UK without the potential paper trail which those outside of Europe experience. Free movement between Europe and the UK would maintain a steady flow of immigrants, inject much-needed workers into the UK employment market and ultimately support the UK property market.
At this moment in time the UK government is talking of no change in the Brexit negotiations and while that may be so when facing their European counterparts, there will be increased hostility in the UK. There is already opposition MPs talking of a second referendum, voting down any Brexit agreement and ultimately pushing for the UK to backtrack and maintain its place in Europe. They seem to forget that the UK population voted for Brexit but then again the whole playing field has moved after the last general election.