Will a hung parliament hang UK property investment out to dry?

What now for UK politics? What now for property UK?

It’s the result no one was expecting, and the result that many are predicting is the worst of all outcomes. The general election result shunted the UK into the arms of a hung parliament. No party won enough seats to gain an overall majority. It wasn’t meant to be like this. The Conservatives were predicted to win a working majority of 80 seats or more. What does a hung parliament mean for property investment in the UK?

What is a hung parliament?

A hung parliament is one where no single party has enough seats in Parliament to vote down all the other MPs put together. In the UK system, that means winning 326 constituencies. When she called the election, Theresa May’s Conservative party was around 20% ahead in the polls. Come election day, and they polled around 42% of the vote. Enough to make them the biggest single party in the new parliament (with 318 seats), but not enough for a majority.

What does this mean for the UK?

As I’m writing this, it looks like the Conservatives will form a government with the backing of the DUP. They won 10 seats in Northern Ireland. Together they will control 328 seats in parliament. This coalition, whether formed officially or with a ‘gentleman’s handshake’, could be a flimsy one. One disagreement on a single issue could cause the coalition to implode.

However, it’s very unlikely that any of the other parties could form an opposing coalition for the government. For a start, they wouldn’t have enough votes to form a majority coalition government. Secondly, both the Liberal Democrats and Scottish Nationalists have categorically said they will not enter into a coalition with any other party.

A further complication is that Sinn Féin won seven seats in Northern Ireland, but they refuse to sit in Parliament. They, therefore, abstain from all votes. So, technically, the Tories are just four seats from a simple majority.

Future uncertainty

For now, Theresa May’s Conservative party has acted quickly and announced its intention to form a government. But with such a flimsy number of seats and votes in parliament, even with the DUP on the side, we could be staring down the barrel of another election later in the year, or at some stage during the Brexit negotiations, which start in a few days. If the Conservatives try to force through an unpopular law or policy and the DUP walks away, there could be a vote of no confidence in the government. Were the vote carried, it would lead to a dissolution of parliament and another general election.

The property market could tread water

In the run-up to the general election, the UK property market slackened. Sales fell back, and the number of houses puts on the market slid. Price rises slowed, and values fell in London. We could see the property market continue to act sluggishly. Investors, businesses, consumers, buyers and sellers hate uncertainty.

An overwhelming Conservative majority could have given the property market a shot of adrenaline. The extra confidence could have been the encouragement it needed to get going again. Instead, we’re left with a market that looks likely to tread water for some time yet. While some experts are saying that this is the last thing the UK property market needs right now, there is always a silver lining to every dark cloud.

Is it possible we could be entering a period of stability?

Theresa May has said she would form a government to ensure a period of stability. Could this be the case? Well, the one thing about coalition governments and hung parliaments is that it's hard to push through radical policy change. In this regard, new laws and policies that are passed are less likely to rock the boat.

If over the course of the next few months, the coalition between the Conservatives and the DUP is found to be stronger than many think it might be, then we could be entering the period of stability the country and property markets required by the back door.

A time for bargain investments?

We’re not looking for a post-election bounce in the property market, but if many home buyers hold off on their purchases, then savvy long-term investors could snap up some extremely good bargains. After all, elections and political shenanigans are all part of life’s rich tapestry.

To stay abreast of all the property investment news that matters, contact one of our team today on +44 (0)207 923 6100. Ask about our newsletter. We give it to you straight. No BS. No hype.

Live with passion

Brett Alegre-Wood

Brett Alegre-Wood
June 12, 2017

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