UK election’s impact on investments

BRITISH voters will go to the polls in seven weeks’ time in an early election announced by Prime Minister Theresa May on Tuesday. On Wednesday, the British parliament voted for the election to go ahead.

While analysts are speculating about the motivation for an early election and how it plays into the Brexit process, global property investment firm IP Global has unpacked Tuesday’s announcement and how it impacts on investment in UK property.

“Deutsche Bank has described the early election as “a game-changer” for the pound, adding that it would raise its sterling forecasts,” says George Radford, IP Global’s director for Africa.

“The pound also passed through its 200- day moving average – a key resistance level – for the first time since the EU referendum last June.”

The FTSE 100 suffered in the hours after May’s announcement in a reaction that was more a function of the strengthening pound than an immediate negative response.

Stocks and shares also saw a volatile day. However, UBS reinforced their view that the economic effects of Brexit will probably only be felt over the long term and that the election would have “a limited economic impact”.

“We expect to see the pound continue to steadily strengthen, with an acceleration should May win her landslide victory– a strong positive outcome for financial markets and investor sentiment. Therefore, we rec- ommend USD-pegged investors to move early to take advantage of their current buying power,” says Radford.

Early reactions across the investment community have welcomed the potential for a clear government mandate to deliver Brexit. “Neither Brexit, nor this snap election will impact on the UK’s growing demand for affordable, high- quality housing connected to major employment hubs, particularly given the UK’s chronic housing shortfall. Outer London and regional cities such as Manchester, Birmingham and Liverpool remain a core focus of IP Global’s investment strategy,” says Radford.

Supply over the short to medium term is likely to be further constricted by political uncertainty, a shortage of EU labour and in the long term, rising construction costs.

PICTURE: AP Britain’s Prime Minister Theresa May. British voters will go to early polls in a few weeks.