2016 continues to be one of the most pivotal years for property investors, but nowhere more so than in the Capital. As the hub of the UK, the Capital can almost be treated as a totally separate economy from Britain, yet it is also inherently connected to any shockwaves felt in the UK property market. As the political and financial centre of the country, the current changes in the Buy-to-Let market are going to be felt adversely in London.
Politically, there are going to be some important developments in the near future. Firstly, there is the London Mayoral Election, which is to be held on the 5th May of this year. Sadiq Khan and Zac Goldsmith – running for Labour and Conservatives respectively – are the two front-runners. Whoever emerges victorious will undoubtedly have a huge influence upon the current property crisis that has been ongoing for the past few years in the capital.
This election has been largely overshadowed by the impact of Brexit on the British economy. There are very few articles on the property policies of the potential mayors, which contrasts with the General Election, where the property market played a central role. Sadiq Khan has placed housing to the forefront of his election manifesto. Khan seeks to increase home building programmes by creating an independent organisation to build an alliance between different groups in the housing and construction industries: housing associations, investors, businesses, and residents’ organisations. He also seeks to have an “Affordable Home” policy which earmarks homes for social rent, where wages are based on a limit of a one-third of average local wages. Khan also aims to build new homes on areas of land which have typically been off-limits, such as Mayoral land, TFL land, and brownfield public land.
For the Conservative candidate, Zac Goldsmith, increasing home building is another central policy. Goldsmith seeks to double house building in the Capital to 50,000 a year by 2020 and giving Londoners the first chance to buy new homes over foreign buyers. In addition, he seeks to ensure a significant proportion of new homes built are earmarked for primarily rental purposes.
The dust will have barely settled from the Mayoral Election when the UK referendum will take place, which has saturated the news in recent weeks for good reason. Whereas the property policies of the mayoral candidates are known, the effects of a Brexit on the sector is far more ambiguous. Both left and right individuals have come out in support or in opposition to the possibility of a Brexit occurring.
Most media and expert reports on the Brexit vote indicates that if the UK does leave the EU, then it will cause uncertainty in the property market. KPMG found that 66% of real estate experts believed that Britain leaving the EU would have a negative impact on inbound cross-border investment. Property experts have noted that the short-term uncertainty surrounding the property market will likely reduce investment levels up to the vote. Some argue that the impact will be felt to its fullest extent within the Capital. Others say that high-paid EU nations won’t find it any more difficult to purchase property in London, meaning that property prices are unlikely to change. Nonetheless, there seems to be no consensus on whether a Brexit would be positive or negative to the UK economy.
For property owners and investors, uncertainty in the market can provide opportunities for individuals with a taste for risk. Currently, the property market is going through a lull between the recent stamp duty surcharge and the future Mayoral and Brexit votes. This means that there could be an opportunity to purchase properties at below market prices, which could soon increase if the markets find the political outcomes satisfactory. For other property owners without an appetite for risk, it may be better to wait until after the outcome of the election and referendum. The future will be clearer and easier to make considered decisions for the growth of a property portfolio.
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Article Courtesy of: Arthur