The Conservative majority delivered at the General Election is the best result for the UK property sector
Our CEO, Randeesh Sandhu shares his thoughts on the outcome of the UK General Election and what this means for real estate industry.
The Conservative majority delivered at the General Election is the best result for the UK property sector. They are clearly the party that has been and looks set to continue to support home ownership with a series of initiatives in their manifesto focussed on supporting first time buyers, such as the proposed mortgage deposit scheme.
We expect the housebuilding market to also be boosted by a resurgent UK economy in 2020, particularly as and when Brexit is resolved. The RICS survey yesterday showed the property industry believes getting Brexit done will trigger surge in housing market and we very much subscribe to that view. The prospect of a trade deal will have a positive impact across supply chains, as well on demand, as greater certainty breeds improved confidence throughout the sector. Although the timing of any deal is clearly not confirmed, the UK economy and property sector starts from a position of strength, with the ongoing growth in wages outpacing inflation which, in turn, should keep interest rates at record lows. All this adds up to healthy picture for UK housing demand.
There are also fundamental structural shifts that are changing the dynamics of the UK real estate market based on societal and technological changes – this looks set to continue to play out ever increasingly in 2020. The demise of traditional retail is the most stark example playing out before us, and the contagion from this will be one to watch closely next year – though not a sector we lend to directly as a standalone asset class, there are elements of commercial and retail units on our mixed use schemes and we have changed the way in which we underwrite these elements of projects. The ageing population, the age at which people choose to marry and start a family, and the rise in single person households, means that the traditional residential housing market will be transformed in the coming years as new forms of housing such as Build to Rent (BTR), co-living and Retirement complexes grow in prominence. According to Savills there is £10 billion of BTR construction underway, another £44 billion in the pipeline nationally with a market potential of £544bn. Indeed, Urban Exposure looks specifically at the opportunities as a lender from these structural changes and how we can develop investment theses for emerging trends, attract capital, and develop compelling lending products.
Elsewhere, with 5G on the horizon, homebuyers demands will continue to evolve, with smart appliances expected as standard now in many new-builds, as well as building methods that adhere to strict environmental criteria. With the new Government setting out a housebuilding target of seeing 300,000 new homes built each year, it’s hard to see how the sector will get anywhere near without embracing modern methods of construction, and fundamentally shifting the categorisation of what a “home” is and ideologies around home ownership – BTR and social rent need to be embraced as being part of the solution to the housing crisis. It is also critical to drive an increase in social housing. Since 2010, homelessness and people living in temporary accommodation has doubled. Of particular resonance to Urban Exposure Plc given our philanthropic focus on children and education – is the 135,000 children living in temporary accommodation and the impact on their long-term life trajectory this will have. It is essential that the new Government develops a meaningful strategy to address this within their housing strategy.