The 2019 general election delivered a Conservative majority government now responsible for leading the UK for the next five years. Regardless of one’s political persuasion, such a decisive victory means we are not likely to again witness the political deadlock that was experienced over the course of 2019.
Indeed, in the aftermath of the general election, there has been a notable resurgence in market confidence which is still being experienced across various sectors, including property. The latest Rightmove House Price Index revealed that asking prices for houses listed on the market rose by 2.3% between 8 December and 11 January. With an average asking price of £306,810, nearly 65,000 UK properties were marketed over the month.
Commentators are calling this resurgence the “Boris bounce”, though there are questions as to whether this is the beginning of a long-term trend or a period of market readjustment. After all, Brexit is far from resolved and the government has yet to deliver its highly anticipated 2020 budget. Nonetheless, there are some important observations that can be made.
Rallying to property in times of uncertainty
With a view to understanding just how Brexit uncertainty is impacting investors’ financial portfolios, Butterfield Mortgages Limited (BML) surveyed a sample of UK investors. Specifically, we wanted to find out what assets currently make up their portfolios, as well as the factors likely to influence their investment strategies in 2020.
Of those surveyed by BML, 61% of investors said they believe traditional assets like property are best positioned to deliver stable and secure returns, with one in five investors planning to increase their property portfolio over the course of 2020. This is reassuring news, demonstrating the resilience of real estate as an asset able to deliver significant long-term returns.
The research also showed that Brexit is playing on investors’ minds. It was revealed that two fifths (42%) of investors are holding off on making any major investment decisions until Brexit has been resolved, though half (49%) are confident in the long-term performance of UK-based assets. This compares to 23% of investors who are looking to assets based outside of the UK in 2020 because of Brexit.
Stamp duty and foreign investment
Post-Brexit, international investment into UK property is likely to become even more important. The research conducted by BML found that a majority (57%) of UK-based investors thought foreign investment was vital to the UK economy. What’s more, 82% of those surveyed think the activity of international investors is vital to making the UK property market desirable and competitive.
However, two-thirds (66%) held the view that overseas investment into UK property should face a 3% stamp duty surcharge―a policy originally mooted by Prime Minister Boris Johnson. Various members of the Conservative Party have also touted other reforms on stamp duty, including abolishing the tax on all homes worth less than £500,000 to ensure more first-time homebuyers can jump on to the property ladder.
Of course, this area of tax is highly complex and requires careful management―not least because it needs to balance vital foreign investment with the needs of the domestic market.
A cause for optimism
2020 looks set to be anything but a boring year. Greater political stability and growing investor demand for real estate should result in more transactions and new opportunities for domestic and international buyers, particularly for the prime central London market. The BML research shows that investors recognise the advantages of real estate investment, and while the “Boris bounce” has been positive for the property market, the future is largely unknown.
I for one look to the 2020 spring budget on 11 March with great interest. As the first major fiscal statement of the new government, it is an ideal opportunity for Boris Johnson and his cabinet to lay down his vision for the country. Importantly, this should include reform to the policies governing property investment, ensuing that domestic and international investors can take advantage of the county’s bricks and mortar.
Alpa Bhakta is the CEO of Butterfield Mortgages Limited―a prime property mortgage provider. She has more than 20 years’ experience in the world of high net worth (HNW) property finance in the UK.
