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Post-UK election reactions: Knight Frank

13 June 2017

9 June 2017, Malaysia 

 
James Roberts, Chief Economist, Knight Frank
“While it is easy to assume the certainty of a clear majority government would have been the best outcome for the economy, actually this result has several positive points. Firstly, the government will probably need the support of several other parties, not just the DUP, to get any future Brexit deal through Parliament, in order to off-set any Tory backbench rebellions. Consequently, the pendulum has swung against Hard Brexit, as a compromise deal will have the best chance of commanding broad support in the House of Commons.
 
“Also, on a day-to-day basis the next government will be restricted to putting consensual, not controversial, policies through Parliament. This probably rules out any more populist taxes on property, or increases in business regulation. Finally, the swing against the SNP could mean that the idea of a second Scottish independence is now quietly booted into the long grass.
 
“In light of the current momentum in the investment market and relative attractions of the UK, plus the likelihood of a weakening currency, we do not expect this result to have a negative impact on overseas investment to the UK, and believe that occupational markets will remain resilient.”
 
Liam Bailey, Global Head of Research, Knight Frank
“The lack of an outright majority, for either major party, in yesterday's UK general election means political uncertainty will continue to influence housing market performance. The market will of course also be impacted by both future Brexit negotiations and the wider economic outlook.
 
“Our central view is that despite renewed political uncertainty in the UK, recent trends will largely continue, at least for the remainder of this year.
 
“Prime markets, especially in London, have been experiencing a tentative improvement in sales activity, from the very low levels hit in mid-2016, while price growth remains subdued – both trends seem likely to remain in place. Mainstream sales markets will continue to see price growth squeezed by affordability limits and funding restrictions – although government support should help new-build sales volumes.
 
“Amid the on-going undersupply of homes in London, the slowdown in new-build starts over the last 12 months suggests that completions may start to dip in two years' time. In contrast, across the UK, new-build volumes will be likely to remain at current levels – due in part to the Help to Buy scheme run by the Government.
 
“The outcome of the Housing White Paper, which was planned for release in the Autumn Budget, will potentially be delayed. The general pro-development policy bias is however likely to remain in place.
 
“The housing market as a whole will be likely to continue to be supported by ultra-low interest rates, despite the risk of higher inflation due to the weak pound, which should remain a fixture through 2017. The weak pound itself should provide some stimulus for the London market in the form of overseas inward investment.”
 
Nicholas Holt, Asia-Pacific Head of Research, Knight Frank
“While the outcome of the UK general election has not been decisive, thus causing further political uncertainty, the appeal of the UK market is unlikely to be significantly diminished from an Asian business or investors’ point of view.
 
“London remains the key European city with education, business and financial ties to large parts of Asia; while the language, legal system, transparency and diversity of its economy will ensure interest remains in the commercial and residential markets.
 
“With the full political fall-out from the election yet to be seen, some decisions may be put on hold.  However, the depreciation of sterling could counteract that to a certain extent, as investors pull the trigger to take advantage of the weaker pound.”
 
The UK residential market background
A review of housing market data since early April, covering the period of the election campaign, confirms a continuation of the slow but steady recovery in prime market activity, with more mixed signals from the mainstream national market.
 
Prime London sales volumes rose by 20% in April and May, compared to the same period last year. The comparison flatters this year's performance, as the 2016 data was adversely impacted by the introduction of the additional rate of stamp duty, this year's sales volumes were at least equal to the levels we saw in same pre-election period in 2015.
 
The performance of prime sales in the country has been particularly positive; sales have risen by more than half year-on-year. Even against the level of market activity in 2015, sales volumes are still higher by more than 30%.
 
The mainstream market has seen sales volumes remain relatively upbeat while the rate of price growth across the UK has seen a rapid moderation, with annual growth falling from just under 10% a year ago to around 3% in May.
 
The London lettings market remains healthy, with the prime market recording increased volumes compared to the same period last year. The potential for modest rental growth is supported by the contraction in available rental stock, with inspections of new properties down 19% relative to last year, while instructions declined 10%. Demand for London lettings is higher than a year ago, with new lettings applicants up 37%, and viewings up by 35%. The number of tenancies agreed rose 26% on last year. 
 
Knight Frank will be updating its market commentary regularly as evidence of post-election market activity becomes clearer over the next few days and weeks.
 
END
 
For further information, please contact:
 
Mr Nicholas Holt, Asia-Pacific Head of Research
nicholas.holt@asia.knightfrank.com +86 10 6113 8030 @nholtKF
 
Ms Rachel Loke, Asia-Pacific Head of Marketing, Communications & Digital
rachel.loke@asia.knightfrank.com +65 6429 3587 @knightfrank
 
Ms Seline Soo, Marketing & Communications Manager, Knight Frank Malaysia
seline.soo@my.knightfrank.com +603 2289 9669 @KnightFrank_my
 
 
Notes to Editors
Knight Frank LLP is the leading independent global property consultancy. Headquartered in London, Knight Frank has more than 14,000 people operating from 413 offices across 60 countries. The Group advises clients ranging from individual owners and buyers to major developers, investors and corporate tenants. For further information about the Company, please visit knightfrank.com.
 
Knight Frank has a strong presence in Malaysia with its headquarters in Kuala Lumpur as well as branches in Penang, Johor and Kota Kinabalu. The company offers high-quality professional advice and solutions across a comprehensive portfolio of property services and is registered with the Board of Valuers, Appraisers and Estate Agents. The Company is licensed to undertake property, valuations / consultancy, estate agency and property management and is also on the panel of all leading banks and financial institutions. For further information about the Company, please visit www.knightfrank.com.my.