The new year of 2020 opened with a revived sense of business confidence, one which has been absent of late following the size of the Conservative victory in the general election.
However, it would be wise to heed the words of former Conservative prime minister Harold Macmillan who, when asked by a journalist what he feared most, is said to have replied: “Events, dear boy, events”.
In the lead-up to New Year’s Day, most commentators in the business pages were looking forward to a “Boris bounce” for the economy, pointing to the surge in share prices that took place in the aftermath of the election. Then, on 3 January, came news of the assassination by the US of Qasem Soleimani, the second most powerful figure in Iran, something that immediately fazed the markets because of the implications for a rise in oil prices and a heightened terrorist threat. Just what Macmillan meant by “events”.
It is not the purpose of this column to dwell on geo-politics but the Iranian situation coming so soon after the confidence-boosting election result shows the wisdom of always looking at the future with caution. The housing market is unlikely to come to a halt because of an, admittedly serious, event in far-off Baghdad but the increasing tensions in the Middle East confirms that any forward movement in our economic well-being will always encounter bumps on the road. I remain confident this year will be a positive one for the housing market, albeit with fingers crossed that the US/Iran situation does not escalate.
Higher levels of housing stock
The presumption of a Conservative government at Westminster for at least the next five years (and perhaps beyond) will encourage private housebuilders to dust off development plans which may have been pigeon-holed by Brexit inertia at Westminster. This is to be welcomed as higher levels of housing stock equates to more affordable homes, especially for those who have not yet secured a foot on the ladder.
On my own local patch, it is good to see a mix of new-build going up on Edinburgh’s South-east wedge, something that will soon be replicated alongside Maybury Road in the west of the city, where 650 homes are planned. I realise the decision to grant developers planning permission is unpopular with some existing residents and I understand their concerns over what they feel is a loss of amenity. Nevertheless, for too long younger Edinburgh couples seeking “back and front door”, family-type accommodation, have had no option but to move to commuter towns as a result of the shortage (and therefore affordability) in the capital.
At the same time, I am confident a spate of new housing will not have an adverse effect on the value of pre-owned, suburban properties. Foot for foot they tend to be more competitive on price than new-build and their proximity to established shops and amenities remains an enduring appeal to buyers. As for traditional flats located in or close to the centre of town, demand simply shows no sign of abating thanks to indigenous and inward investment in the local economy.
The end of the threat of a solidly left-wing Labour government has already boosted rental investment. I’m not sure if John McDonnell’s stated intention to force landlords to sell their homes to sitting tenants (at a discounted price) would have applied to devolved Scotland but the blow to confidence brought about by such an occurrence would have undoubtedly filtered north of the Border. As would the proposal to make every estate subject to inheritance tax over a “lifetime allowance” of just £125,000. Incidentally, less this sounds to some to be too “landlord-friendly”, let me point out that a constant supply of new landlords is required to replace those selling up; if not then the result is reduced rental stock which inevitably means higher rents.
So on balance 2020 still looks like a good year for those seeking to buy, sell, rent and let out. With the proviso one should always be mindful of unexpected “events”.
- David Alexander is MD of DJ Alexander