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COMMENT: Impact of UK general election on residential market

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Commenting on the potential impact of the UK general election on the UK's residential housing market, Cushman & Wakefield’s head of UK residential development and investment, Jack Simmons, said: “Theoretically, the UK general election should make no difference to buyers of individual residential properties. 

“We sit within a low interest rate environment, which is set to stay, we have a significant supply-demand imbalance which cannot be solved quickly and there is little difference between the political parties in terms of their residential manifestos: they all agree we need to increase the supply of housing.  Although Labour favours a mansion tax, generally speaking the UK buyer is wealthier than ever and overseas investors are seeking purchases of less than £2 million.

“Whilst saying this, sentiment plays a huge role in the residential market and many individuals will employ a ‘wait-and-see’ strategy when contemplating moving house.  Therefore, it is anticipated that whilst rates of sales and mortgage lending volumes will fall during the general election, this does not mean prices will fall.  The overall capital growth forecasts for the year are positive for the UK at 4.8% and for London at 2.8%.

“Where the political manifestos on the residential market do differ markedly though is in terms of the rental market.  At one end Labour favours greater regulation, whilst at the other the Coalition is warning against red tape which will stifle investment into the private rental sector.

“Conversely, the general election will have a profound effect on both the residential development and investment markets.

“In development terms, developers need to liaise closely with local planning departments to either obtain guidance or determination of planning applications.  The period prior to the general election, known as purdah, generally precludes any major decisions being made, thus developers’ timelines will be stretched.  Also, it is unlikely any developer will purchase sites during this time as they will not be able to gain planning clarity.  Consequently, a continued constraint on the supply of housebuilding sites will naturally result in high land prices.

“The residential investment market will also be affected as landlords seeking to purchase private rental sector investments will be keeping a close eye on which party wins, due to their differing manifestos.  If Labour wins, there will potentially be greater costs which will reduce net income levels.  However, it could work well for those larger scale landlords which already have professional working practices in place.”

For further detail on this issue, please call Jack Simmons on +44 20 7152 5386 or email jack.simmons@eur.cushwake.com.