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UK General Election: What does it mean for UK Real Estate?

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On 22nd May 2024 Prime Minister Rishi Sunak called a Snap Election, waving in a General Election that will see the voting public select a new Prime Minister and governing party. After assessing the public reaction, and the political developments that have followed – namely Nigel Farage’s appointment as leader of The Reform Party – we now write to you to provide our analysis of the likely outcome, and what this will mean for UK real estate and in particular our preferred asset classes, including residential-rental, logistics and real estate senior debt.

Before we get into the thick of it, we ought to start by saying that the decision to call a summer election comes as a surprise to many. While we can’t be certain why Sunak opted for an early-than-anticipated vote, there is speculation in some quarters that both personal and political reasons have converged to erode the Conservatives’ electoral prospects, and this presents as a ‘salvage’ exercise to protect the incumbent’s power base.

Headline policy announcements, in particular the new ‘quadruple lock’ – which will effectively make state pension payments tax-free in perpetuity – and calls from the front bench to shore up safe blue seats, have all but confirmed this to be the case.

In spite of this strategy, it is widely expected that the Conservatives will not win this election. Recent polls, and polls of polls, consistently point to a significant Labour lead. We anticipate that this gap will narrow as we get closer to July 4th when voters head to the ballot box. But with the advent of the Reform Party and Nigel Farage’s decision to lead it, the ability for the Reform Party to split and severely undermine the Conservative vote should not be underestimated.  

A Labour government does not pose a material risk to the execution of our strategy. On balance, Labour’s transition away from residential rent controls, coupled with its emphasis on reforming the nationally significant infrastructure regime to capture and depoliticise logistics projects, are net neutral to net positive for our portfolio. Of course, there are policy ideas within its manifesto that are ill-refined. They could also shift over time. But generally, the Labour party does not threaten the prospect of economic recovery, and on a base level is arguably more ‘pro-development’ than its competition.

Regardless of the outcome of the election, our view on our exposures is not expected to change. 2024 and 2025 are likely to be exceptionally attractive vintage years for mid-box logistics, single family housing and build-to-rent, as occupier demand outstrips supply. Countercyclical, defensive cover in the form of private debt meets fresh financing demands continues to offer highly attractive risk adjusted returns. This is especially true as inflationary pressures persist irrespective of which administration is welcomed in.

If Brexit taught us anything, it’s that predicting UK politics is like forecasting the weather—always unpredictable and full of surprises. But if you would like to discuss our view in more detail, please do not hesitate to reach out.