12 Apr

2010 Election Special

2010 Election Special

With the UK General Election just weeks away Nick Churton of Mayfair International Realty looks at the potential impact on the property market both in the UK and overseas.

 Nick says "In the UK we are only weeks away from a crucial general election.  On the 7th May we will know the outcome but it looks neck-and-neck at the moment. Labour (sort of Democrats) have been in power for thirteen years.   They are going for an historic fourth term.  But the Prime Minister, Gordon Brown, is not as popular as his predecessor, Tony Blair.   Labour promises more of the same.  The Conservatives (sort of Republicans) need a swing of historic proportions to gain an overall majority in parliament.  They promise change.  If the leader of the Conservatives, David Cameron, is made Britain’s 53rd prime minister since the role was fully established in 1721, he would, at 43 years, six months and six days, be Britain’s youngest premier since Frederick Jenkinson in 1812. If there is no clear majority the Liberal Democrats (sort of somewhere between the other two) should hold the balance of power.  They could, of course, win themselves - but as they haven’t been in government since 1915 that would be a truly historic result.

As far as the real estate market is concerned it should not really make much difference which party is in power.   Any administration will have to deal with the serious aftermath of the global credit crunch and recession, together with the UK’s current national debt, running at over £900 billion ($1,521 billion) - or £14,684 ($23,332) for every man woman and child.  This will inevitably mean higher taxes and interest rates, a freeze in public sector pay and a lowering in public investment.  Strangely none of the political parties vying for power seem to be saying too much about this at the moment.

Life will become harder financially for many over the next few years.  This is inescapable.  But the UK real estate market should continue to grow, and interest in overseas property – in the doldrums for a while – will grow also.  Individuals and families will get on with their lives despite the economic climate. The real estate market, like nature, finds a way.  But the next UK government could help to make mortgages easier to obtain by encouraging greater lending by the banks.

Some recent budget moves to help first time buyers could stimulate more market activity.  But the UK market has been slowly gaining momentum for sixteen straight months so the tax break may not make that much difference.  Buyers at over £1 million ($1.5 million) will see a lift in Stamp Duty - a home purchase tax - from next year so this may encourage more activity in this area - if only to avoid extra tax.

UK residents are resigned to increasing living costs and this will inevitably have some impact on the market. But while the UK has come out of recession later than most of the other leading economies, recent forecasts show that it should grow at a faster rate than the average for the Euro zone giants, Germany, France and Italy in the first half of this year. UK unemployment is lower than anticipated.  Real estate agents from across the UK report more interest and activity.  Property prices in key areas are rising.

So while it is hard to see how, after the election, any one political party could have any more impact on the real estate market than another, it seems that they don’t really have to as we are doing it for ourselves!"