Following the general election 2015, Johnny Kelly, associate in the real estate group at Mishcon de Reya, considers what the election result could mean for the property sector.
What does the result mean for your practice area?
One form of uncertainty is replaced by another. Before the election, markets were nervous about a mansion tax and possible capital flight if the non-dom rules were changed, plus the usual pre-election uncertainty about the prospect of change.
In view of the result, these issues may have gone away for a bit. But there is now fresh reason for uncertainty. The new government is committed to an EU in-out referendum in 2017. It no longer needs to do a deal with the Liberal Democrats, who might have vetoed a referendum.
So for the next two years, businesses won’t be sure how far they can plan ahead. Will this have an effect on investment? Many business leaders seem to think leaving the EU would be a bad move.
From the manifesto pledges, what is on the horizon for your area?
Investment in infrastructure would help make developments viable. Conversely, reduction in public spending, maybe in the form of job cuts, will reduce the spending power of consumers and homebuyers and could affect businesses too. Businesses need premises so the impact for the real estate industry is obvious.
Extending Help to Buy will boost the demand side of housing. However, continued protection of the green belt and complete local control over planning will help to keep a lid on the supply side. As Cathedral Group CEO, Richard Upton said in an article last week:
‘[…] politicians are still obsessed with the demand side of the [housing] equation, when we so obviously need to concentrate on supply.’
Is there any immediate action practitioners should take in light of the result?
If you are developing real estate, get under the skin of the local planners to understand if there’s really support for your project. Trying to push through a scheme against concerted local opposition can take so long that you could miss the market.
Invest for the long term not the short term—and be prepared for a bumpy ride!
For more on what the election result could mean for the property sector see: What’s on the (Tory blue) horizon for the Property Industry?
Interviewed by Lucy Karsten.
The views expressed by our Legal Analysis interviewees are not necessarily those of the proprietor.
Source: LexisNexis Purpose Built
