There have been rumours and counter rumour since the general election last week but it seems as though the UK government will be good to its word with regards to regional devolution. George Osborne today announced plans to give some of the larger cities across the UK control over elements of the budget which are traditionally controlled by Westminster. Many have suggested this is a hedge against possible Scottish independence/home rule but whatever the reason there could be some interesting positives for regional property markets.
Is central rule working?
If the government of the day is willing to give away control of significant budgets you have to ask the question whether central rule by Westminster is working. There are arguments for and against this particular subject but surely if central government is not working then we could see a decentralisation of public services which are predominantly based in the south of England. This is something which many investors across the UK have been demanding for some time because it could have a significant impact upon local property markets.
Cheaper employment costs outside of southern England
There is no doubt that employment costs in London and the South of England are significantly greater than those for example in the north-east of England. It would be wrong to suggest there is not already an array of public services in the north-east, with a significant benefits office just outside Newcastle, but perhaps further decentralisation of public services will help. We could see a double whammy if this was to occur with a reduction in employment costs and a more buoyant local economy.
As night follows day, an improvement in any local economy will eventually filter through into the local real estate market which will address the imbalance between the North and South of England in particular.
Will the government be brave enough?
Devolution to a select few larger cities across the UK has already grabbed the headlines amid cries that we are seeing the breakup of the Union before our very eyes. It is therefore unlikely that the UK government will cede full control of local budgets in the short to medium term but it may well be a long-term aspiration. As we touched on above, any improvement in local economies will filter through to local property markets which will put the government of the day in favour with voters.
Long-term planning required
Those who make significant returns in the real estate market are those that plan ahead and look at potential scenarios going forward. There is obviously a greater risk investing in real estate ahead of any material change in the local economy but the wheels are now in motion and it looks highly likely further devolution will occur not only in England but across the UK. This could significantly change the outlook for local property markets and address the imbalance between London and the rest of the UK in relation to property prices.
Interesting times ahead!