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As the Conservative party take control
MACAU, 4 June 2015 – In the aftermath of the general election that saw the property industry breathe a sigh of relief, we now look at the implications the vote has had on the housing market, and towards what we can now expect post-election.
Continuity and stability has returned to the market following a period of uncertainty where the threat of mansion tax amongst other measures caused a pause in activity. Adam Challis, Head of residential research at JLL comments: "There is no doubt that London breathed a sigh of relief as the prospect of Mansion Tax evaporated and whilst in the 6 month run-up to the election the number of transactions recorded in some areas of the prime market cooled by a third. The question now is how strong the demand 'bounce' will be and if we will return to the heady unsustainable rates of growth that fed the market in the 2009."
JLL believes that whilst there will be a renewed level of demand in the PCL market, underpinned by a more balanced supply backdrop, this will take some time to have an impact. Challis continues: "We have seen strength in activity resume in the prime central London market but we predict this to stabilise as the industry settles down and the new Government beds in."
For Central London new build activity, off-plan sales remained robust in the first half of 2015, with some sensitivity for high-value property. Development activity has been shifting towards Outer Core areas over the past 12 months, with annual starts up by 59.3% in contrast with Core Central London, which is down by 43.2% over the year.
Looking forward we now need to focus on supply solutions that will tackle the real issue facing the UK housing market. Adam Challis comments: "Policies to date have been about the demand-side solutions (such as HTB), but Government needs to concentrate on policies that can drive a step change in supply solutions. Whilst these will take some time to bed-in and manifest themselves, they will be the solutions that ultimately provide the help where is it needed most."
JLL predicts that with five years' worth of clear runway to aim at, we can expect to see a continued rate of growth in housing market transactions that have been slowly gathering momentum since the Conservative majority victory on 8th May. We predict that pricing is likely to remain under upward pressure, in line with a healthy, stable economic backdrop, real income growth, near-term political risks subsiding and a sclerotic housing supply response will all play out.
Challis stated: "Political risks are always present in residential markets. The UK needs a Government that actively seeks to provide certainty so that markets can behave efficiently for the benefit of the economy."
With certainty and stability resuming, there are three political changes that may create renewed tensions in the housing market – the EU Referendum, regional devolution driven by Scotland and in London the 2016 Mayoral elections, where housing and affordability will take centre stage on candidate manifestos. In the one region of the UK where Labour support actually grew, expect some of the national election ideas around high-value property taxation and caps on rental growth to re-emerge.
In line with JLL forecasts from November 2014, continued modest price growth of 4%-5% is anticipated nationally through the course of this year and over the medium-term. As a result, our pricing and transaction forecasts remain unchanged nationally.
Risks from the general election were, in our view, strongly biased towards uncertainty of a potential change of government rather than the reality of any particular outcome. The exception to this was clearly in Prime London, where even the possibility of a Labour Government created negative market impacts. However, our central view of a market that remains fundamentally well-supported holds true and we reaffirm our expectation of modest price growth over the course of 2015.
Challis concludes: "Government could and should have a major role to play, but the industry itself must also look to modernise or experience even greater volatility than we saw through the last cycle. Now more than ever is the time to establish the industry structures which will meet the needs of our growing population, while also insulating the sector from cyclical delivery that can reverse the gains from better times. So, the housing industry should be optimistic about market prospect for the years ahead, while also seeking to consolidate improvements and create the foundations for a more robust sector for the long-term."
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Notes to Editors:
To download the report please visit: http://residential.jll.co.uk/en-GB/new-residential-thinking-home/research.aspx
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