There was an audible sigh of relief on Monday as Theresa May emerged as the sole candidate to become the UK’s next prime minister.
“There’s only one real bit of news,” a City agent told me that afternoon, as suspended retail funds began the sell-off of major assets.
“We finally have the next leader in place so we can get on with negotiations and get some certainty.”
Political risk has shot up the chart of concerns facing the industry to a slot not previously seen in this cycle.
Will May deliver the cooler political climate the industry is hoping for?
Europe
“Brexit means Brexit and we’re going to make a success of it”, May has said in her first speech as prime minister designate.
She will not trigger Article 50 of the Lisbon Treaty, which would formally take Britain out of the EU, before the end of 2016.
However, she would like to start informal talks with EU leaders over the summer.
Those negotiations will be “critically important”, said British Property Federation chief executive Melanie Leech.
She said: “She must consider fully how changing regulations around the free movement of people, financial regulation and energy and environment policy will impact on industries such as real estate, which play a vital part in supporting the UK’s social and economic infrastructure.”
Kinder capitalism
Perhaps tellingly for business, in her first speech she focused not on the EU, but on creating a fairer society.
For big business, this would entail putting worker representatives on all main British company boards; imposing tighter rules on executive pay; and making shareholder votes on corporate pay “not just advisory but binding”.
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“It’s not anti-business to suggest that big business needs to change,” she said. “This is a different kind of Conservatism, I know. It marks a break with the past. But it is in fact completely consistent with Conservative principles.”
Cushman & Wakefield’s head of UK & Ireland, Colin Wilson, said any agenda around making sure there was a diverse workplace would be a “good thing”. However, he said the detail on changes to boards and pay would be very important.
Housing
Housing is central to creating a fairer society, May has indicated.
“Unless we deal with the housing deficit, we will see house prices keep on rising,” she said.
“Young people will find it even harder to afford their own home. The divide between those who inherit wealth and those who don’t will become more pronounced.”
Speaking to the BBC, housing minister Brandon Lewis, who is tipped for a cabinet post, said her housing policy would include investing in all tenures.
Investment in the private rented sector would be a welcome boost to the industry, said Tony Brooks, joint managing director at Moda Living.
He said: “Simply building more homes for sale isn’t the solution – there is an on-going shift in the way we live and many have come to value the flexibility of renting, so delivering quality homes for rent is key to addressing the UK’s housing shortage.”
Dominic Martin, operations and strategy director at Westrock said: “If May wants to make a meaningful difference, she should be looking to boost supply across all tenures, not just for sale housing.
“Scrapping the 3% stamp duty land tax surcharge for institutional investors and amending the planning system to support build to rent would be a welcome start.”
Tax
In her brief comments on the economy, May argued that the Bank of England’s monetary policy was making it more easy for people to get on the property ladder.
She said: “Monetary policy – in the form of super-low interest rates and quantitative easing – has helped those on the property ladder at the expense of those who can’t afford to own their own home.”
The industry is hoping there will be some kind of tax boost to encourage new developments.
Jane Hollinshead, principal at IJD Consulting and former head of real estate at Addleshaw Goddard, said there should be a “rates holiday” for new development.
She said: “Anything that incentivises people to make a positive decision to commit, rather than postpone activity, must be right at the top of her list.
“She should look at an SDLT reduction for commercial transactions in the investment market and a rates holiday for new development.
“Both are key in kick starting an ailing market and ensuring that we continue to be attractive to domestic and foreign capital.
Northern Powerhouse
If May is really going to rebalance the economy, she will need to follow through on the Northern Powerhouse but without George Osborne, expected not to remain as chancellor.
Speaking in Birmingham, she said the UK needed a plan to develop all of Britain’s regional cities, not just “one or even two of our great regional cities” – apparently referencing the success of Manchester.
Peter Tooher, executive director at Nexus Planning said certainty around infrastructure investment was critical to driving forward property development around transport hubs like HS2 statiopns.
Jane Hollinshead said May needed to focus on making sure areas outside of London continued to grow following the referendum vote.
“When the market is under stress, it retrenches to what it knows best,” she said. “I think that this conservatism will be reflected in a continued appetite to deal in London assets, but regional activity, particularly in the office and retail market will be harder hit.
“Now more than ever, we need to avoid the dangers of a twin track economy experienced only five or so years ago, so any near term policy decisions by May should be focused on keeping the regions open for business just as much as London.”
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