Genral election may cause threat to UK property remarkable turn around
Last year saw a remarkable turnaround in the UK property market and although there will be further challenges in 2010, most notably the general election, a recovery is underway, according to a new report.
This year has got off to a very satisfactory start and sentiment in the property market has improved as mortgage finance, while still restricted, continues to cheapen, the new quarterly review from Winkworth says.
The prime property market remains buoyant, with a deficit of available properties and currency weakness attracting a steady stream of overseas buyers. With prices showing some recovery, we hope to see more properties coming to market over the course of the year, especially family houses where there is still a significant shortage,’ says Dominic Agace, chief executive of Winkworth which has 80 offices in the UK, France and Portugal.
In the lettings sector a limited availability in stock reflects a return to historic levels, without significant upwards price pressure, the report shows. Corporate rentals are slowly returning, although they still remain well below the levels seen in 2007. The report predicts that the rental market should continue to firm up, with shorter void periods and limited upward price pressure.
The big unknown of 2010 is the general election, with a hung parliament now being tipped as a relatively likely possibility, which could herald a period of uncertainty in the real estate market. But the report concludes that it is easy to over estimate the impact this may have on the housing market and the economy generally.
‘So far, there is little indication that the property owning and buying public will change its behaviour before or after the nation goes to the polls,’ the report says.
But others believe that even although the general elections do not usually have much sway on the property market in the UK, this year’s election could have a greater impact, particularly on mainstream real estate, than past elections because of where we are in the housing cycle.
Because the property market is already in a state of low turnover and is only partially functioning due to the global financial crisis, it is perhaps more vulnerable to the slightest political changes, according to Lucian Cook, residential research director at real estate adviser, Savills.
‘We have a partially functioning market where recent price growth has been driven by cash and equity rich buyers chasing low stock levels. With continued constraints on mortgage lending, the market is heavily dependent on sentiment amongst a certain class of buyer, particularly against the background of continued economic uncertainty,’ he explained.
‘We expect to see these low transaction levels continue up to the election and through the immediate aftermath as political uncertainty makes buyers and sellers pause for thought. In itself this could cause volatility in price movements, with possibly more short term downward pressure on prices in the mainstream market than we have seen in the past twelve months,’ he added.
He believes that a hung parliament could lead buyers and sellers to remain cautious, which would suppress turnover levels and limit the prospects of price growth for longer.
‘Without doubt, and probably regardless of which party wins, an outright majority would be the best outcome for the housing market in 2010, and possibly through to 2012, the year we have pencilled in as the start of a more sustained housing market recovery,’ said Cook.