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  • Writer's pictureRealFacts Editorial Team

Renewed Optimism for UK Property Market Amid Political Shifts


UK

The UK real estate sector is experiencing a renewed sense of hope following the recent general election. With Labour's decisive victory and Keir Starmer as the new prime minister, industry leaders are optimistic about a fresh start after years of instability. According to Bisnow's Mike Phillips, the combination of a stabilizing market, lower interest rates, and a more predictable economic landscape could significantly benefit the property sector.

Melanie Leech, CEO of the British Property Federation, highlighted the potential for positive change. "The market is starting to move again — interest rates are coming down, construction costs have stabilized, and valuations are becoming clearer," Leech noted. "If the new government can quickly implement its promises on planning and economic growth, it will have a fair wind behind it."


The Labour government's focus on overhauling the planning system is seen as a key enabler for economic and social impact. Starmer and Chancellor Rachel Reeves have committed to stimulating housebuilding by reintroducing housing targets for local authorities and streamlining planning decisions for large infrastructure projects. This could address the chronic undersupply of new homes, which fell significantly short of previous government targets. In 2023, only 133,213 new homes were built, far below the target of 300,000 new homes annually set by the previous Conservative government.


Manish Chande, Senior Partner at Clearbell, expressed a cautious optimism shared by many in the industry. "After the challenges of the last decade — all the changes of prime minister, Brexit, higher interest rates — I think business and the person on the street wants some stability post the election," Chande said. He likened the potential impact of the new government to the "new manager" bounce seen in football teams, where a change in leadership often leads to improved performance.


While the Labour government has ambitious plans, the effectiveness of these initiatives will depend on their timely and efficient implementation. The property industry is particularly interested in changes to the planning regime, which Starmer and Reeves emphasized in their campaign. Proposed reforms include reintroducing individual housing targets for local authorities, centralizing planning decisions for large national projects, and increasing resources for the planning sector. A new National Planning Policy Framework to deliver these goals could be introduced by the end of the year, potentially reviewing greenbelt policies to allow more development around London and encouraging large-scale "new town" projects.


Lorraine Baldry, Chairman of Inventa Partners and former President of the British Property Federation, pointed to historical precedents for Labour's potential impact. She recalled the creation of urban development corporations, like the London Thames Gateway Development Corp., under the last Labour government in 1997, which successfully boosted housing and commercial real estate development. Baldry suggested that similar mechanisms could help address current housing and infrastructure challenges.


Despite the optimism, some in the property sector remain cautious about certain Labour policies. The sector is wary of potential rent control measures advocated by London Mayor Sadiq Khan, which could impact the build-to-rent sector. Additionally, while Labour has promised not to increase income tax or national insurance, there are concerns about possible changes to capital gains tax, which significantly affects property investment deals.

"The unions still carry a lot of influence," Chande noted, expressing a common concern. "Are they a wolf in sheep’s clothing?" However, the broader sentiment is that after a period of nearly constant uncertainty and upheaval, the UK and its property sector have a chance to change the narrative.


Since 2016, the UK property market has faced numerous challenges, including Brexit, the pandemic, and fluctuating interest rates, all of which suppressed investment and growth. But with the new government in place, there is renewed interest from overseas investors. "We’ve had more inquiries from overseas investors about putting money in the UK in the last few months than we’ve had for some time. We think maybe this is an opportunity for the UK," Chande said.


The UK property market stands at a potential turning point. With a new government promising significant reforms and a stabilizing economic environment, there is cautious optimism that the sector can overcome recent challenges and contribute positively to the broader economy. The effectiveness of Labour's policies and their implementation will be crucial in determining whether this optimism translates into sustained growth and stability for the UK property market.

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