The Conservative Party’s victory in the UK General Election on 7 May led to an immediate increase in sales of luxury property in London; but, according to The Daily Telegraph this has also caused a sharp rise in the value of the pound sterling, which means that foreign buyers are having to pay more for their investment.
Property deals which had been agreed in principle in the weeks leading up to the Election suddenly burst through in a flood as if a dam had broken. Many would-be buyers were waiting to see what would happen in the Election, as the leader of the Labour Party, Ed Milliband, had promised that if his party came to power they would impose a “mansion tax” – a tax on all property worth £2m or more. Labour also planned to remove the advantages of “non-domiciled” status for those who own property in the UK but spend most of their time abroad.
Despite pre-election polls forecasting that no single party would have a majority in the House of Commons after the Election, which would have brought a great deal of uncertainty to the British political scene, the Conservatives won 331 seats in the 650-seat chamber, giving them a majority of 12. As well as the almost audible sigh of relief which this brought from much of the business community, the Conservative victory triggered massive activity in the luxury property market. Estate agents who deal in the high end of the property market in London reported doing over £100m worth of business on Friday 8 May, the day the result of the Election became known.
In the immediate term, though, the Conservative victory has also had a down side for foreign buyers. The value of sterling has risen significantly against major currencies. For example, the pound is at an eight-year high against the Euro. This means that it is costing foreign investors from Russia, China, the Middle East and even the USA around £33,000 more on each £1m that they spend than they would have paid before the Election.
But for serious High Net Worth (HNWI) investors, this is little more than an irritant. London remains the venue of choice for many of the world’s wealthiest people, not only for living but also for buying property for investment. Indeed, around half of all property purchases in the luxury segment of the market are made by international buyers.
As well as the now regular HNWIs – from Russia, China and the Middle East – an increasing trend in the luxury property market in London is buyers from India. The strength of the Indian economy had already seen more buyers from the sub-continent in recent months; but estate agents reported a marked increase in enquiries from Indian investors in the days following the UK General Election.
The overall impact of the Conservative victory in the Election will become clearer over the weeks and months ahead. This is the first time since the parliament of 1992-1997 that the Conservative Party has been able to rule with a majority, however small that majority may be. But many investors are already indicating that they see increased stability for the next five years – and they are more than willing to show this by purchasing luxury property in London.
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