As Boris Johnson storms home to Downing Street, investors have given their vote of confidence to housebuilders with enormous gains overnight.
Berkeley rose over 13%, Crest Nicholson over 7%, Redrow over 6%, Bellway over 11% and Bovis over 8%.
It’s well known that uncertainty is kryptonite to financial markets, and Johnson’s majority of just under 80 seats has revived confidence in the UK. Clearly, investors feel that Johnson’s Britain provides more stable ground to build on.
“The UK is likely to leave the European Union on 31 January, with a vote in Parliament and a Queen’s Speech expected before Christmas,” said Liam Bailey, Global Head of Research at Knight Frank. “This will, for the time being, end the uncertainty of a no-deal Brexit and pave the way for the release of some of the pent-up demand that has built in property markets in recent years.”
There have been many indicators that the UK’s property market would breath again once a bleary-eyed Britain emerged from the polls, with many buyers waiting to see the result of the election before resuming their search for a new home.
“Real estate decision makers have long craved greater political certainty, and this morning, that is the headline they have woken up to,” said Stephen Clifton, Head of Commercial at Knight Frank. “We expect this clearer direction for UK politics to empower corporates to dust off expansion plans, developers to commence new schemes, and investors at home, and abroad, to quickly buy into what now looks like a very attractively-priced real estate market.
“2020 will therefore be a much more active year on all fronts, as the UK reconfirms its status as one of the world’s few truly global real estate markets.”
While the markets revel in much-needed certainty, Johnson’s pledges on housing are being brought into sharper focus. The housebuilders’ rally indicates a nod of approval towards pledges that refocus on homeownership, particularly for first-time buyers.
“Meanwhile, interest rates are likely to begin a gradual process of normalisation in 2020 as Brexit risks fade, which could mark the end of a period of ultra-low mortgage rates, which is something borrowers may factor into their decision-making,” said Bailey.
“The pound rose against the dollar on news of the election result – from the $1.30 it was trading at before the result to around $1.34 – this upwards trajectory could begin to encourage overseas buyers into the market before any further erosion of their buying power,” he added.
Housebuilders may be able to enjoy breaking more solid ground as we head into 2020; however, with a split vote on the left, Johnson will have a lot of people to keep happy to stop the market quivering in the New Year.
