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27 June, 2017
The General Election, which was supposed to strengthen Theresa May’s hand both in the Brexit negotiations and domestically has actually seen a resurgence of the Labour Party and the Liberal Democrats. While the Conservatives have managed to form a government, their majority is tenuous and some feel that the uncertainty surrounding this (and the prospect of another election later in the year) could do serious damage to the housing market. Others, however, point to the fact that the UK still has a chronic shortage of residential property and that therefore the ancient laws of supply and demand will keep the property market strong.
Gavin Barwell is replaced by Alok Sharma
Had Gavin Barwell held on to his Croydon Central seat, he might well have held on to his job as housing minister. As he lost it, former foreign office minister Sharma has been appointed his replacement. There are a couple of interesting points to note here. First of all, Barwell is very much still involved in government, having been appointed Theresa May’s chief of staff. This means he could potentially still lend his expertise to the area of housing and, arguably most importantly, still act as a champion for the White Paper, which set out the government’s strategy for fixing the “broken housing market”. Secondly, Sharma was minister for Asia and the Pacific, which is a region where there has been a lot of interest in investing in the UK property market (both residential and commercial).
Housing supply was a priority for all parties
While the various parties all made their own promises on the topic of housing, they all showed an awareness of the issue of lack of supply, both in the sales market and the rental market. It may therefore be feasible for the government to push forward with its housing commitments (potentially with some amendments in some cases, to resolve differences with opposition parties) with the support of the commons as a whole.
Some proposed projects may be slowed or put on hold
In this context, the word projects, refers to more than just government projects, although government actions could certainly have an impact on the likelihood of this happening. To begin with, the construction industry has long relied on labour from EU migrants, which may be jeopardized in the Brexit process. One way of resolving this issue, would be to develop technological solutions (such as robot bricklayers), but companies are only likely to invest in the necessary research and development if they think that there’s a feasible chance of them at least getting their money back. Hence, resolving the issue of EU workers one way or the other is arguably a first step to getting housing projects moving. The other key step is to work with the financial-services sector to ensure that they are comfortable with financing realistic projects.
Sterling’s weakness will be international investors’ gain
Astute investors learn to see through short-term volatility and look at the bigger picture. In this case, everything comes back to the UK’s massive under-supply of housing, which makes the UK property market a massively attractive long-term prospect for investors in general and even more so when a weak pound makes it more affordable.
Fletcher Day are a full-service law firm with a team of commercial property lawyers in London, specialising in acquisitions, real estate financing, landlord and tenant matters and premises licensing.
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