As I write, the Conservatives are almost there, but it is still uncertain who will form the next government. But whatever happens over the coming hours, days and weeks, historical data shows that there is very little, if any, correlation between the stance of a government and the returns achieved on real estate.
Whether a UK parliament is left or right minded in its policies makes little difference. The industry is influenced more by global economic cycles, and whichever amalgamation of political parties take the helm, whoever is in charge will need to adapt to these pressures and not simply rely on past performance – much like your average investor.
But from a real estate returns point of view the coalition could have been worse. According to the IPD UK Annual Property Index, there has been a 6.7% real return on real estate investments over the period of the Con-Lib pact. Not quite comparable to the 9.9% average of the Blair Labour years from 1997 to 2007, but certainly favourable in comparison with the 4.1% average of the Thatcher/Major Conservative governments.
The returns during the Cameron-Clegg government have to be taken in the context of a recovery from the mid-noughties property crash, credit crunch and subsequent recession. Whilst that 6.7% could be seen as quite respectable, it was coming off the back of the credit crisis, and so anything would have been an improvement on the -1.2% seen during Gordon Brown’s time in office.
Focusing on the immediate term the Cameron-Clegg coalition market appears to have steered the market into a relatively heathy position. Values are in the ascendency across virtually all property types and total returns across all property reached 17.8% in 2014, the highest level since when Gordon Brown took office back in 2007. The industry eagerly awaits the results and whatever your political stance we’ll be hoping for a government that can continue to strengthen the country’s underlying economy.
Phil Tily is executive director at MSCI
