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UK General Election and the Housing Market [VIDEO]

The UK general election was called on 18 April. Unusually, news of the UK general election was not leaked, preventing a lengthy build-up in the housing markets. Virata Thaivasigamony, spokesperson of CSI Prop shares his views on the subject.

Click on CC for subtitles. Or else, feel free to read the full transcript below:

The Prime Minister’s call for a UK general election in (less than 6 weeks) was a surprising one. There are pros and cons, of course. The UK general election is an opportunity for the new government to create policies and a clean slate to do something for the voters. We all know that the no. 1 thing on voters’ minds are housing affordability and shortage of housing.

On the day of the Prime Minister’s announcement, the pound dropped then rose to its highest level in weeks. In fact, it’s been on an upward trajectory since. IMF revised its prediction of the growth of the UK economy from 1.5% to 2%. Even Deutsche Bank, who has been very critical of the sterling, reversed its stance, citing the election as a game changer.

We at CSI Prop predicted that the pound would drop immediately after Brexit then rise — which is exactly what happened. It is our sense that the pound will continue to rise over the coming months.

The UK housing market has been a resilient one over the years. However, there will be uncertainty leading to the elections. Major decision-making may be put on hold until the election results are out.

But the uncertainty will be relatively short as there has been no news of the UK general election that was leaked. This prevented a lengthy buy-up that would have otherwise affected the housing market.

Ultimately, there is a critical shortage of housing in the UK. Demand continues to outpace supply so it’s only logical that for many years to come, prices will continue to remain high.  However, the UK general election is an opportunity for the new government to start on a clean slate and make changes that will affect the housing market. Of course, we hope that the government will revisit policies affecting landlords, foreign investors, and the buy-to-let market. After all, these people are key to ensuring housing supply in the UK.

Theresa May’s domestic agenda is to “build a country that works for all”. It is our sense that if she wins, she will have more flexibility to make compromises to ask for a more moderate deal for Brexit without being beholden to groups interested in a hard Brexit, or even support from her very own party. This should have a positive impact on the UK economy and the pound sterling which is great news for investors taking advantage of the favourable exchange rates.

It’s premature at this point for anyone to guess who will win the UK general election. We will of course continue to monitor developments in the market and keep you posted. Suffice it to say, regardless of who wins, the housing crisis and shortage of housing (in the UK) isn’t going anywhere.

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CSI Prop proudly promotes international investment property with high yields at low risk. Our portfolio comprises residential and purpose-built student property in cities across the United Kingdom (London, Luton, Manchester, Liverpool, Newcastle, York, Glasgow, Scotland; Sheffield, etc); Australia (Melbourne, Perth, Brisbane) and Thailand (Bangkok). Our projects are concentrated in high-growth areas with great educational, infrastructural and job growth potentials. We aspire to make a difference in the lives of our clients by helping them achieve their investment goals through strong market research backed by third party experts and due diligence. 

Disclaimer: CSI Prop does not provide tax & legal advice and accepts no liability. Readers are encouraged to consult a qualified tax or legal advisor for a thorough review.

Need advice or clarification? Call us for more information and/or to find out about our projects! Hotline: 03-2162 2260

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Australia’s Housing Market to Remain Bubbling

Looks like the Australian housing bubble is here to stay for some time yet. Image credit: globalriskinsights.com

Very recently, the Victorian government announced the abolishment of the controversial stamp duty for first-time homebuyers. This ‘lifeline’ to young people struggling to get on the property ladder takes effect from July 2017 and is applicable for any homebuyer in Victoria whose property costs less than AUD$600K.

In a market where experts and market watchers are spouting concern over housing undersupply and skyrocketing house prices, this could well be the road to hell being paved by good intentions’.

Why?

Because simple economics tells us that cheaper property prices (in the form of the abolished stamp duty in this case) will stimulate demand. And increased demand in an overheated market will push prices higher in that price range. Even Federal Treasurer Scott Morrison has shared his reservations, which you can read here.

Compounding this is the low interest rates (the central bank slashed rates twice last year) which  contributed to the boom in house prices, particularly in Melbourne and Sydney. Experts argue that to put a dent in the housing market, the RBA would need to raise interest rates, which is unlikely due to concerns about inflation and the risk that it would impact the economy significantly.

Sharp increases in interest rates may not be the wisest thing to do because it will affect growth and if anything, the RBA would likely increase rates on a gradual basis.

Which is why it may be some time yet before the prices of property will collapse as interest rates would have to rise to a certain level before the property bubble will pop. An article in The Daily Reckoning reports that when the US housing market blew up in 2007/2008n, it was the result of the Federal Reserve raising rates 17 times (25 basis points each time) from 2004 to 2006.

So it seems most likely that the housing market may well bubble merrily away…and house prices in Melbourne at the very least will continue going higher for some time to come.

Read more at http://bit.ly/2m6wLL1

CSI Prop proudly promotes international investment property with high yields at low risk. Our portfolio comprises residential and purpose-built student property in cities across the United Kingdom (London, Luton, Manchester, Liverpool, Newcastle, York, Glasgow, Scotland; Sheffield, etc); Australia (Melbourne, Perth, Brisbane) and Thailand (Bangkok). Our projects are concentrated in high-growth areas with great educational, infrastructural and job growth potentials. We aspire to make a difference in the lives of our clients by helping them achieve their investment goals through strong market research backed by third party experts and due diligence. 

Disclaimer: CSI Prop does not provide tax & legal advice and accepts no liability. Readers are encouraged to consult a qualified tax or legal advisor for a thorough review.

Need advice or clarification? Call us for more information and/or to find out about our projects! Hotline: 03-2162 2260