CoStar News catches up with the industry to start to make sense of what it might mean for property after last nights general election results.
It reports: "The property industry alongside the rest of the country is waking up this morning to a surprise and uncertain political environment with the Conservative Party having secured the most votes in yesterday's General Election but missing out on enough for a majority.
The initial response from property industry experts has been one of concern at further uncertainty in terms of what government will be formed and its position on a range of crucial issues. That said, in uncertainty there is always likely to be opportunity for property investors.
The most immediate concrete result has been a hit to Sterling with by 0530 GMT, sterling 1.5 per cent lower against the doall on the day at $1.2753 - having fallen as low as $1.2693 - and 87.78p per euro.
Inevitably there will be much focus on what it means for the UK's Brexit negotiations with raised expectations that the timetable will be delayed as well as some expectations that there could be a "softer" Brexit result with potentially beneficial implications for London offices.
Melanie Leech, chief executive, British Property Federation, said: "This is not the outcome the country needed going in to the Brexit negotiations or in terms of setting a clear direction for the UK’s future. Businesses don’t like uncertainty and there will clearly now be a further period of uncertainty, which will be unhelpful. Whilst there may be further uncertainty at a national level, BPF members will continue to work with local leaders, including the newly elected Mayors across the country, to invest in local communities – and we stand ready to work with whatever shape of government now emerges."
James Roberts, chief economist, Knight Frank, said: “While it is easy to assume the certainty of a clear majority government would have been the best outcome for the economy, actually this result has several positive points. Firstly, the government will probably need the support of several other parties, not just the DUP, to get any future Brexit deal through Parliament, in order to off-set any Tory backbench rebellions. Consequently, the pendulum has swung against Hard Brexit, as a compromise deal will have the best chance of commanding broad support in the House of Commons.
"Also, on a day-to-day basis the next government will be restricted to putting consensual, not controversial, policies through Parliament. This probably rules out any more populist taxes on property, or increases in business regulation. Finally, the swing against the SNP could mean that the idea of second Scottish independence is now quietly booted into the long grass. In light of the current momentum in the investment market and relative attractions of the UK, plus the likelihood of weakening currency, we do not expect this result to have a negative impact on overseas investment to the United Kingdom and believe that occupational markets will remain resilient.”
Hayley Scott, Investec Structured Property Finance, said: "Today’s election result will have a major impact on the real estate market as well as the wider economic landscape. Volatility and uncertainty may return to the sector. We expect sterling to initially fall sharply on the prospect of Brexit talks falling into turmoil putting further pressure on currency-linked inflation as import prices continue to rise.
"A number of proposed new projects may indeed be put on hold as the property sector takes stock of this result. Banks are likely to be cautious about financing new developments. Real estate as an asset class will lose favour with institutional and overseas investors as doubts hang over the UK real estate sector.
"Whilst too early to predict what this result will lead to, in the longer term there are some encouraging ideas for the property and housing sectors in the Labour manifesto, such as support for Help-to-Buy funding, giving long-term certainty to both first-time buyers and the housebuilding industry, and wholesale reforms of the rental sector and increased protection for the consumers. As long as policy does not impinge on viability as active lenders into the Build-to –Rent sector, we are supporters of these measures."
Andy Martin, senior partner at Strutt & Parker, said: “This was clearly not the desired outcome when the General Election was called and puts the UK in an untenable position as it presents the prospect of further political unrest. It will be difficult to get anything done, or for any coherent policies to be formed and will damage the UK’s prospects. It is very likely that another election will be called in the near future.”
Gerry Hughes, Chief Executive at GVA, said: “Today’s result is certainly not the outcome the property market had hoped for. Both parties must now act as a unified front to secure the best deal for the UK in exiting the EU, delivering much needed stability and clarity for the markets and confidence for UK and overseas investors. Reducing any uncertainty is crucial.
"A glimmer of positivity is that we may finally have greater transparency around the Brexit debates and negotiations. There is no longer any mandate for Brexit to be progressed behind closed doors.”
Colin Wilson, Head of UK & Ireland, Cushman & Wakefield, said: “A hung parliament is clearly not the outcome that business expected from this election. What we needed, only a year on from the EU Referendum, was a sustained period of political stability in the UK, especially for the important negotiations ahead. Instead, after weeks of domestic campaigning, in place of clarity we have further uncertainty.
"The result makes strategic planning for business harder and this could result in some decisions being delayed. However, if there is a lesson from our experiences over the last 12 months, it is that UK business, including the real estate industry, has become accustomed to uncertainty and managing through it – as evidenced by the many significant investment and occupier commitments since last June. Leadership, clarity and unity are the three things that business will be looking for now. ”
Chris Ireland, CEO, JLL UK said: “The UK has faced political uncertainty in very recent history and, notwithstanding the dramas that immediately followed the Brexit vote, the UK economy and property market remained very resilient. The IPD benchmarking index has regained almost all of the losses it sustained in August over the past few months.
“Investors in real estate look over the medium to long term. London sees by far the most cross-border investment of any city globally, and the UK is rated by JLL as the most transparent real estate market in the world. This is a result of liquidity, the history of political stability over the long term and respect for the law, as well as factors such as the strong economic fundamentals, long lease terms and the comprehensive professional and legal framework.
“The result suggests that the hard Brexit that many were assuming would now definitely occur looks somewhat less likely. That could be a longer term positive for the UK market.
“Sectors with long-term structural support, such as Logistics and Alternatives, will remain strong. If the pound remains weak, Retail and Hotels will benefit – alongside UK manufacturing. But as before, JLL continues to believe the UK offers significant opportunities for medium and long term investors.”
On the loss of Housing Minister Gavin Barwell’s seat, Jon Neale, Head of Research, JLL UK added: “With Gavin Barwell's departure from Parliament, we are now facing the prospect of yet another Minister for Housing, the fourth in five years.
“Given the huge role that a high youth turnout has had in changing the political landscape, it must now surely be time for all parties to prioritise an issue that has had more negative impacts on young people than any other, and increasingly erodes the competitiveness of the British economy.
“The next housing minister must be an experienced and hard hitting political figure, and the role must be inside the cabinet. They must help develop a genuinely radical housing policy. Indeed, this should be seen as an electoral priority by all parties if the young continue to become more active at the ballot box.”
Ian Fletcher, Director of Real Estate Policy, British Property Federation, added: “The need for a significant increase in new homes was acknowledged by all the political parties during the general election. The Conservatives had a plan, via the Housing White Paper, going into the election and upped their ambitions, promising 1.5 million new homes by 2022. That ambition will only be met through a multi-tenure approach, and we estimate Build-to-Rent could help the new Government meet a quarter of its housing shortfall.
"Many in our sector share the Government’s desire to deliver 1.5 million homes by 2022 and the greatest impediment to all our ambitions will be procrastination. Our part of the sector has plenty of funds to invest and if even as a stop gap, new Ministers should adopt the White Paper and maintain momentum on delivering the homes we need. For the sake of those needing a home, let’s all just get on with it.
“We are sad to see Gavin Barwell losing his seat. In a relatively short space of time, he had shown himself to be very clued up on the sector and its challenges, keen to do things and very much a pragmatist. We hope he is not lost to housing, and pops up in our sector in other guises. So far as new Ministers are concerned, it is far too early to speculate. If Gavin Barwell had a clone, we would love to have them! The important thing is to have somebody who is passionate about the sector, pragmatic rather than dogmatic, such are the challenges the sector faces, and who is decisive and wants to get on with delivering the quality homes we need.”
Carol Hopper, real estate partner at Ropes & Gray, said: “This result may well lead to a market correction, which could increase deal activity, as investors looks to sell positions and opportunistic buyers selectively look to take advantage of that.”
Analyst Jefferies is advising buy on housing stocks to take advantage of "weakness and wobbles".
It said: "Yesterday's election was called by the Conservatives in the belief that they would be able to strengthen their hand rather than weaken it. Uncertainty surrounding Brexit has increased in our view. The prospect of another election looms and activity in the UK housing market is likely to slow, in our view. Share prices overreacted follow the UK's EU referendum and we would buy UK housebuilders on weakness today, next week and the week after that.
"Expect the unexpected Another election, another unexpected result. We may now seen a change at the helm of the Conservative party, with May looking shaken and stirred rather than stronger and stable and perhaps another general election after the summer, which may be a summer of discontent.
"What happened a year ago? Following the unexpected EU referendum result the UK housebuilders share prices fell, on average, by around 40%. As markets closed yesterday the sector was trading broadly where it closed on 23 June 2016. Our take is that even the uncertainty of Brexit is not enough to undermine the strong fundamentals of the UK housebuilding industry. Buying on weakness was the brave thing to do last year and luck favoured the brave then and we expect luck to favour the brave again now.
"Harder or softer Brexit? With an unexpected general election result, we are wary of making predictions about the future hard or softness of Brexit. The truth is we do not know, just as we didn't know on the 24th and 27th of June last year. What we do know is that UK housebuilder share prices over reacted to the Brexit uncertainty and for a while share prices were divorced from the strong fundamentals. If they over react again, we suggest buying the shares again."
On UK estate agents Jefferies predicted "further dark days ahead".
"We expect that the impact of a hung parliament will be to further depress the level of housing transactions and cause more households to defer their home moving plans. There is, however, a silver lining to the housing market cloud however, further tightening in second hand stock levels would, in our view, underpin prices reducing the risk of significant house price falls."
Ed Cooke, chief executive of Revo, said: “For too long there has been electoral uncertainty and today’s mixed result means the parties must now come together in the national interest to form a viable government as soon as possible. Now is the time for bold leadership and for decisive government.
“The world around us is evolving at an extraordinary rate, bringing both challenges and opportunities; policy must be developed in partnership with industry to ensure the country is equipped to meet the future social and business challenges, and embrace the opportunities to futureproof the UK’s position on the global stage.
“The retail, retail property and placemaking sector is a cornerstone of the UK economy, helping to generate more than £25 billion in taxes each year and supporting over 3 million jobs. The primary concern for retailers and other occupiers at home and abroad is the overwhelming burden of business rates. Whatever shape the next Government takes it must deliver reform to the system, and reduce the burden, to allow our industry to thrive and prosper.
“We await the outcome of negotiations but our businesses, communities and our places cannot be left wondering indefinitely. It is vital that the needs of businesses invested in towns and cities across the UK are not overlooked in the coming days.”
Claire Fallows, Partner, Real Estate team, Charles Russell Speechlys, said: “A hung parliament is the outcome that few in the property industry would have wished for. A quest for strong and stable government has ended in uncertainty for the country and the inevitable political manoeuvring is underway. The cost of coalition can be high. Whether or not Theresa May continues as Conservative leader, if the party seeks to form a minority government, its ability to drive reform is questionable.
"There is much unfinished business. Decisions need to be made on big ticket infrastructure items, including expansion of Heathrow. Rafts of secondary legislation are required under the Housing and Planning Act 2016 and Neighbourhood Planning Act 2017. Further reforms mooted by the Housing White Paper are on hold. The future of the community infrastructure levy, deemed unfit for purpose, needs to be determined. Indeed, the thrust of the Conservative’s housing agenda may be considered afresh, particularly with former Housing Minister Gavin Barwell losing his Croydon seat.
"It is to be hoped that those elected will work together where necessary in the interests of the country to maintain economic growth and support jobs and new homes. However, philosophical differences between the parties run deep. There is scope for every piece of legislation to be scrutinised heavily and concessions sought as the price of passage through Parliament. The appetite of any minority government for legislative reform would be sorely tested.
"What the country desires from Brexit remains unclear. Top of the list for the development industry may well be a sensible deal on immigration policy as there are serious concerns about the future availability of labour to build the infrastructure and houses the country needs, with skills shortages already evident. The spectre of hard Brexit may now seem less likely, but those working in the UK will need to take a leap of faith as to what lies ahead.
"Is there a silver lining? From the activity we have seen and companies we have worked with, business has proven its resilience in the ten years since the financial crash and become adept at handling uncertainty. With uncertainty comes opportunity. The next government needs to do everything it can to help businesses move forward in a complex market place.”
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