By Jamie Johnson, CEO, FJP Investment
Regardless of the outcome, the UK’s 2019 General Election promised to be a pivotal event. After nearly a year of Brexit delays, political infighting and general market uncertainty, Prime Minister Boris Johnson’s decision to call a general election in December was seen as an attempt to deliver a majority government. And unlike his predecessor Theresa May, the gamble paid off – the Conservative Party won a convincing majority.
Whatever one’s political persuasion, Boris Johnson’s victory provided some clarity of what the future was likely to hold. And the reaction to the election result was almost immediate. The pound surged in value and investors rallied to UK-based assets. Of course, such radical market movements are nothing out of the ordinary following a major political event. However, this so-called Boris bounce has continued to gain momentum well into 2020.
Take a look at the property market. According to Zoopla’s UK Cities Price Index, demand for UK property in January resulted in house prices rising at their fastest pace since 2017. What’s more, prices in the 12 months to January 2020 grew by 3.9% – the highest rate of growth recorded since September 2017. These statistics show that buyer appetite for UK real estate is only increasing, in turn driving up house prices and delivering significant capital growth for investors.
The 2020 Spring Budget takes on added significance
Investors are clearly confident in the current government, but we must put things into context. Boris Johnson’s administration is likely to be in power for five years, and there are a host of pressing challenges it must address. The most important of these is Brexit – after all, negotiations have only just begun, and it will be a tall task striking a new arrangement with the EU by the end of the transition period on 31stDecember 2020.
The first real test for Boris Johnson will come on 11thMarch when the Chancellor Sajid Javid delivers the 2020 Spring Budget. This is a rare but important opportunity for the Government to begin addressing pressing national issues that have so far been overshadowed by Brexit. The housing crisis immediately springs to mind, as does investment to support the UK’s regional hubs. Regardless of what is eventually announced, it must demonstrate a bold vision for the country to help inspire confidence amongst investors, businesses and consumers.
What policies do property investors want to see?
At the beginning of the year, FJP Investment surveyed over 750 property investors to uncover their sentiment towards different policies that have been proposed by Boris Johnson. Primarily concerned with the property market, the results were both insightful and timely.
The FJP Investment study revealed that 70% of investors are in favour of the Conservative party’s proposed 3% stamp duty surcharge for non-UK property buyers. There have long been calls for the Government to review stamp duty to ensure it is not deterring homebuyers from accessing new opportunities. This is particularly true when we consider first-time resident homebuyers who have yet to jump onto the property ladder.
However, this is not the only way of solving the issue of housing affordability. The construction of new-build properties to meet market demand has been the topic of ongoing discussion. However, simply putting up new builds that are unattractive or poorly finished will not solve these problems.
For this reason, the government has also announced its plans to give local residents more say in the style of new developments in their area. This is something 68% of property investors support. Furthermore, three-fifths (60%) of investors also support banning the sale of new homes as leaseholds.
Property investors are also clearly hoping for the budget to deliver what they deem to be much needed reform to the buy-to-let market. Just over a third (36%) of those FJP Investment surveyed want Boris Johnson to soften the government’s stance on property investors and buy-to-let landlords in terms of regulations and tax. Since 2010, landlords have had to pay more tax and abide by more regulation, which has dampened appetite for this type of property investment.
Of the other election promises, 59% would be happy to see income tax rates frozen for the next five years, and just over half (54%) are in favour of not raising capital gains tax between now
and 2025. Again, there seems to overwhelmingly support from most of the property investors we surveyed regarding the Conservative Party’s proposed fiscal reforms. The question of whether the Government will actually commit to these reforms will be revealed once the 2020 budget is unveiled on 11th March.
Early signs are promising
As most will have predicted, the December 2019 General Election was dominated by Brexit. Indeed, the Labour Party attributed their poor performance to the fact that the election campaigns and debates focused on little else. However, in its manifesto and when on the road trying to win people’s votes, the Conservative Party also promised many potential reforms during the campaign.Some might argue that this placed a pivotal role in Boris Johnson’s election victory.
FJP Investment research shows that when it comes to the property market, the majority of UK investors are in favour of the key policy ideas. This includes the proposed stamp duty surcharge for overseas buyers as well as giving local residents greater say in new-build developments in their area. With 2020 now fully underway, the question now is whether Boris Johnson and his team can deliver on their promises.
Yes, there are many uncertainties on the horizon, but we should not overlook how the wider economy has performed in recent weeks. The UK still remains an attractive destination for investment, and this explains why there has been a significant injection of capital into the financial markets since the 2019 General Election. The UK Government needs to build on this momentum and ensure that Brexit does not overshadow some of the pressing national issues in need of urgent attention.
There’s no doubt about it – we are in for an exciting year. I look forward to seeing what the future will bring.