Brendan Sharkey, head of MHA MacIntyre Hudson’s Property & Construction sector, explains what we can expect to see in construction and real estate.
- Sterling fall against the major currencies, facilitating UK assets such has London housing stocks and commercial property being cherry picked;
- Stagnation, if not a slight fall, in house prices across the UK;
- Local authorities trying to take more control over the delivery of affordable housing;
- Less volume in house sales, which will lower the Stamp Duty Land Tax take for the government;
- Build to Rent to continue apace, as the rental market has not gone away; the companies in this market may find less competition for quality sites.
We are left with a hung parliament with a potential for a new conservative leader to come forth and take us to another general election in the autumn. In the short term, this means indecision – little is likely to change when the prospect of new policies is on the horizon.
Once sterling has fallen, along with the stock market, we’re likely to see more hesitancy, unlike post Brexit which seemed to be a stimulus for economic activity. Many longer term investment decisions by UK and international corporates will be put on hold.
The Conservatives white paper, “Fixing our Broken Housing Market”, was very much the heartbeat of their election manifesto with a few tweaks towards more intervention with local authorities. The white paper was not considered revolutionary, but it was recognised as a genuine attempt to deal with the housing shortage. We would like to think that, come the autumn, whoever is in power will stick to the basic principles, if not improve on them.
Both the Conservatives and Labour recognised the need to build new homes and the only difference between them was how many, and by when. The Conservatives out-bid Labour by committing to build 1 million homes by 2020, with an additional 500,000 by 2022. Such targets are unlikely to be met while we have this political vacuum.
The construction industry is forever plagued by leadership and policy changes as most infrastructure projects cross over elections, meaning there is never clear water to steer towards.
The good news is that the hard Brexit fundamentals may be softened, reducing the concern over an adequate labour supply to build the housing we need. The sheer cost of moving along with lower net incomes due to inflation and job insecurity could also mean more extension and refurbishment work for the SME builders.
PICTURE CREDIT: Sophie Brown