Last night, Theresa May became our country’s 76th prime minister, following her rival Andrea Leadsom’s surprising decision to withdraw from the Conservative leadership race.
May – the daughter of a vicar – is one of the longest-serving home secretaries in history, and will become Britain’s first female Prime Minister since Margaret Thatcher.
So what will a government led by Theresa May mean for the property market – and our country?
Making the EU exit a success
In a statement following her election, May promised to build a “better Britain” and “to make a success” of Brexit. She spoke of the need for strong leadership to steer us through this uncertain economic and political time, and the need to negotiate the best deal for Britain in leaving the EU, and forge a new role for Britain outside the EU.
Though many had been speculating a second referendum, May – who supported Remain – has clearly stated that “Brexit means Brexit”, and there will be no second EU referendum.
Dealing with the “housing deficit”
May has made it very clear that housing is an issue she will tackle as Prime Minister. In a speech delivered in Birmingham on Monday, she stated: “Unless we deal with the housing deficit, we will see house prices keep on rising. Young people will find it even harder to afford their own home. The divide between those who inherit wealth and those who don’t will become more pronounced. And more and more of the country’s money will go into expensive housing instead of more productive investments that generate more economic growth.”
What will happen to property prices?
If the government finds a way of controlling net immigration and May delivers on getting “more houses built”, she does have a chance of finally swinging the supply and demand balance in the London housing market, which has kept prices significantly increasing year on year.
This is quite unlikely however, as we do not currently have the house building capacity in terms of manpower to see supply outstrip demand.
Unless this changes and the supply of housing increases significantly, certainly in the short-term we don’t expect to see an immediate drop in prices across London. Outside prime central London, the market is driven by domestic buyers rather than investors, who will still need somewhere to live regardless of our status outside the EU. They will also continue to need to upsize as their circumstances change, and we expect this market to be relatively unaffected by Brexit.
Conversely, the prime central London market was showing signs of a slowdown prior to the Referendum, and in areas of central London, we had seen prices start to soften following a decline in the number of transactions. The decline in prime central London which had already started pre- Brexit is likely to continue.
What needs to happen?
Housebuilders shares have fallen post-Brexit, and most are now reassessing land approvals. Our Portico’s Regional Director, Mark Lawrinson’s view is that “May and her government need to not just build more houses but make the building of houses easier, be that by reducing planning restrictions on Brownfield Sites, encouraging more young people to take up the trade through funding and education, speeding up the planning process time it takes for developers to get sites off the ground, or incentivising smaller developers – as well as the larger groups – to build with potential tax breaks for hitting a certain quota year on year.
We then need to make the process of buying property easier and cheaper; as much as Stamp Duty Land Tax has been reviewed, it is still a significant cost to any potential purchaser on top of a large despot required to obtain a mortgage. If we are successful in building more houses and reducing the costs associated with buying property, it will help generate more transactions, which will keep momentum in the market and keep house prices at a steady level.”
To buy or not to buy?
Lots of buyers have been holding off on purchasing property, due to political uncertainty and the fact that Mark Carney signalled possible interest rate cuts.
Now we have regained some political certainty and the Bank have today announced their decision to leave interest rates unchanged, those holding off hoping to get a better rate may now decide to act.
Only time will tell…
Only time will tell what May’s coronation will really mean for the property market and for Britain. What is certain however, is that her pro-EU background and her years of experience in UK government and in Europe has created a level of certainty with regards to the direction in which the new government is heading. And ultimately, a level of certainty is exactly what the property market needs to regain momentum.
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Robert Nichols is Managing Director of London Estate Agents Portico, with branchesin Acton, Battersea, Bloomsbury, Camden, Clapham, Dulwich,Fulham, Hammersmith, Highbury, Islington, West Hampstead, Bethnal Green, Leyton, Walthamstow, Ilford, Forest Gate, Woodford and Chigwell.
For media enquiries and to interview Robert Nichols (Managing Director), please contact:
Portico Press Office 020 7428 5314