Few could have missed yesterday’s shock announcement that UK Prime Minister Theresa May planned a snap election for just seven weeks’ time. In a move welcomed by opposition leader Jeremy Corbyn, she is largely expected to gain permission from Parliament today to go ahead with the vote.
What does this mean for your UK property investment strategy? Here’s the early view from our investment team:
Why did May call this election?
Primarily, to reduce the chance of her currently-modest Parliamentary majority hamstringing her Brexit negotiations right at the end point, which would also coincide with the run-up to a 2020 Election.
She is expected to see a landslide victory: the latest opinion polls put the Conservatives at over 20 points ahead of the Labour Party, so this is an opportunity for May to garner a stronger public mandate and parliamentary support during Brexit negotiations.
HOW HAVE MARKETS REACTED?
Pound rallies to six-month high
Deutsche Bank has described the early election as “a game-changer” for the pound, adding that it would raise its sterling forecasts. The pound also passed through its 200-day moving average - a key resistance level - for the first time since the EU referendum last June.
The FTSE 100 suffered in the hours after the announcement – in a reaction that was more a function of the strengthening Pound rather than a negative immediate response. Stocks and shares also saw a volatile day. However UBS reinforced their view that the economic effects of Brexit will likely only be felt over the long term and that the election would have “a limited economic impact".
CURRENCY OPPORTUNITY COUNTDOWN - YOUR INVESTMENT STRATEGY
Seven weeks to act
We expect to see the Pound continue to steadily strengthen, with an acceleration should Theresa May win her landslide victory – a strong positive outcome for financial markets and investor sentiment. Therefore we recommend USD-pegged investors to move early to take advantage of their current buying power.
Certainty to prevail
Early reactions across the investment community have welcomed the potential for a clear government mandate to deliver Brexit.
Neither Brexit, nor this snap election will impact the UK’s growing demand for affordable, high quality housing well-connected to major employment hubs, particularly given the UK’s chronic housing shortfall. Outer London and regional cities such as Manchester, Birmingham and Liverpool remain a core focus of IP Global’s investment strategy.
Supply over the short to medium term is likely to be further constricted by political uncertainty, a shortage of EU labour and in the long-term, rising construction costs.
As ever, we’ll be closely monitoring this situation and will keep our investors updated as new announcements are made. Follow us onor to keep up to date on this developing story and more.