SandaireDecember 13 2019

UK Election: Investment and Real Estate Market Outcomes

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Following last night’s UK General Election and the historic Conservative victory, Sandaire’s Investment Management and Real Estate teams look at the outcomes for their relevant markets.

Investment Perspective

For the first time in 32 years the Conservative party has a substantial majority to fall back on, while the Parliamentary gridlock of the last decade has at last come to an end.

Asset price reaction has been swift, with the pound rallying 2% against most major currencies and many domestically focused UK stocks up over 5%. With the Labour party and Liberal Democrats in disarray, the Prime Minister now has scope to negotiate a trade agreement with the EU, without any effective opposition from within Parliament. The outcome of these negotiations are, of course, still uncertain and it remains to be seen whether tariff free trade can be agreed upon.

More positively, in the near term, we believe the February budget is likely to bring fiscal stimulus, which combined with pent-up demand from businesses to invest, following three years of considerable uncertainty, should result in an attractive investment climate for the first time in a while.

UK Real Estate

Last night’s historic and convincing Conservative victory in the UK General Election is good news for UK Real Estate.

The two headwinds of Brexit and domestic political uncertainty have combined in recent months to virtually stall the commercial property market with buyers and sellers both sitting on their hands.

Whilst Brexit remains an ongoing uncertainty, the relief that will be felt at there at last being a strong UK government with a decisive mandate will – in our opinion – override lingering uncertainty about Brexit, at least in the short term, and we expect the much talked about wave of UK and overseas capital waiting in the wings to enter the market early in Q1.

Boris Johnson clearly has the ability now to deliver Brexit, the form of which will be revealed in January 2020. However, storm clouds may gather rather sooner than later over the question of the United Kingdom given the tone of a nationalist vote in both Northern Ireland and Scotland. This may in the short to medium term make non-domestic investors wary about buying property in these locations. London and the English regions will of course be unaffected by this.

The overnight strengthening of sterling will of course erode some of the attractiveness for overseas buyers but UK Real Estate still remains attractive compared to most other European countries.

Whether this result will help stem the flow of retail capital out of real estate funds remains to be seen, but institutional sellers will at least have a stronger market place in which to sell if they have to.

At Sandaire we are always looking for opportunity and will complete today on the acquisition of a 25 year long let investment that we agreed to purchase just three weeks ago at an attractive price whilst uncertainty stalked the market.