Boris Johnson’s decisive majority in Friday’s general election precipitated a surge in confidence across the markets. Sterling rose sharply overnight and the FTSE 250 marked its biggest jump in a decade as investors piled into UK stocks with residential housebuilders leading the charge. The property industry was quick to respond over the weekend with some sales agencies promulgating the immediate effects of the ‘Boris Bounce’.
There is no denying the instant relief felt by stakeholders in the prime London property market as Johnson seized a thumping majority for his mission to get Brexit done; seeing off the threat of Corbyn and his manifesto pledges in one fell swoop.
Whilst not wanting to put the brakes on the current mood, it is clearly too early to know how the residential market will react in the long-term. Like many, we had already seen an increase in buyer demand long before the election took place, with a committed pipeline of buying clients well in excess of £100m by the end of Q3. With sellers reluctant to bring their properties to the market in such uncertain times (and limited distressed sales), the greatest barrier to entry has been low volumes of good quality stock. Following Friday’s result, we expect many patient vendors to re-engage, precipitating a long overdue redressing of the supply-demand dynamic in the new year.
Meanwhile, we have real concerns that the election result may further exacerbate the gap between vendor and buyer expectation on price (already a regular feature of recent transactions), with vendors hardening their resolve to achieve record pricing and buyers still sensitive to elevated transactional costs. Lest we forget that back in 2014 it was racing values and a hike in stamp duty (amongst other taxes) – and not Brexit – that led to the market demise. Certainly in the short term stamp duty is only going one way, with a further 3% for non-residents likely to be implemented in the forthcoming Spring Budget.
For now, the political headwinds are behind us and we don’t expect confidence in the London market to be heavily affected by the Brexit negotiations next year (with an exception perhaps amongst European buyers who may want more clarity around the future trade deal before committing long-term). A new battle may loom with the Scottish National Party over Scottish independence, but it is unlikely to dominate the Westminster agenda and any disruption (perhaps to currency) should be short-lived.
Whilst this year has been a record year for RFR, it has been achieved against a challenging backdrop. We are genuinely looking forward to working in a more fluid, confident and dynamic environment but we will continue to warn of getting swept away in the euphoria of the moment. The last four years have reminded us all that property is an illiquid asset class and served to demonstrate the importance of buying good quality properties, understanding true market value and to keeping an eye to future liquidity and change in circumstance. The fact that there may be more quality properties to buy in the new year is a wonderful Christmas present for us all!