UK General Election 2024: The potential impact on the UK real estate market

The release of the manifestos last week means we are now in a better position to evaluate the impact of different political administrations on the real estate market. Current polls suggest a significant lead for the Labour party with 43% of the vote, compared with the Conservatives at 22%. So, unless there is a seismic shift over the next two weeks, a Labour administration will likely be sworn in on 9 July. This would be followed by the State Opening of Parliament and the King's Speech, outlining the party’s priorities on 17 July. 

A new government would provide a “new beginning,” potentially boosting sentiment and aiding economic recovery. Labour has set out a range of policies that are pertinent to and broadly supportive of the real estate market. We welcome the commitment made to boost housing delivery – Get Britain Building Again – reform planning and exploring the potential for “new towns”. The latter is not without challenges, particularly; identifying and consolidating the optimum sites, large upfront infrastructure cost, incentivising and resourcing the housebuilding sector to deliver new homes (including affordable housing), and supply chain and skills challenges. Substantial government intervention and investment would be needed to achieve this ambition. However, the manifesto presents significant opportunities for clients operating in the large-scale development and living sectors across England. 

Regardless of what political party is in power, we have found there is no real difference to the overall performance of the UK real estate market. Since 1970 we have had three Labour-led governments and three Conservative-led governments. Labour has been in power for 19 years and the Conservatives for 35 years. Over that time, economic growth has averaged 2.1% per annum (pa). Despite three of the five recessionary periods falling under a Conservative administration, the average economic growth was marginally higher during Conservative rule (2.2%) than under a Labour government (1.9%). This relationship is mirrored in commercial property returns. Since 1970, total all property returns have averaged 10.4% pa, with capital growth of 4.4% pa and income return of 5.9% pa. Total returns under a Conservative administration are slightly higher at 10.5% pa, compared with 10.3% under Labour. 

However, timing is everything. Focussing on more recent history, total returns during the last Labour administration (1997 to 2010) averaged 8.8%, despite the fallout from the Global Financial Crisis. This is significantly higher than the 6.6% in the subsequent Conservative-led government, which faced challenges like Brexit and the COVID pandemic. 

2024 is set to be the largest election year in history, with 60 countries, including the UK, holding national elections. Around 40% of the global population – or two billion individuals – will be eligible to vote. Some of the elections (like the UK) could lead to a political power shift. Still, as we’ve shown, regardless of which political party is in power in the UK, the real estate market remains resilient, with sustained levels of growth. A new government, particularly one with a sizeable majority, will be empowered to deliver their manifesto commitments. This should bring a level of stability, certainty, and increased confidence, which should benefit the housing, infrastructure, urban regeneration, green energy, community building, healthcare, and life sciences sectors.