The prime minister, Theresa May, has announced a general election on 8th June, saying: “At this moment of enormous national significance, there should be unity here in Westminster, but instead there is division. The country is coming together, but Westminster is not,” adding that “division in Westminster will risk our ability to make a success of Brexit.”
Why call a general election now?
Of the 24 British prime ministers during the past 100 years, Mrs May is one of 14 who have assumed office without general election. She hopes a general election giving her party a greater majority in parliament will provide her with a stronger mandate, gaining her more leverage amongst MPs at home and with Brexit negotiations.
In a general election, all members of the House of Commons are elected and the majority party is invited to form a Government. This normally happens every five years, but this early election means that the vote will come three years earlier than expected.
While the Conservative Government gained power with a small minority in 2015, the opposition Labour party has since lost popularity, making a strong Conservative election win likely. Current polls suggest that the Conservatives have an 11 – 21-point lead (depending on who you believe). A strong Conservative majority in the House of Commons will make it easier for the Government to pass legislation and will strengthen Mrs May’s position – both as a public vote to confirm her leadership and to confirm support for her ability to negotiate a good deal from the EU.
Both Labour and Conservative parties have said they would enact the UK’s 2016 referendum vote to leave the EU, making it possible that some ‘Remain’ voters could be attracted to the small Liberal Democrat party, which has said it would overturn the referendum decision. Even so, Brexit is unlikely to be affected by the general election and, as talks are not expected to begin seriously until after the German federal elections in September, its timing is also unlikely to be affected.
What about Scotland?
Scotland voted to parliament 56 SNP and just three non-SNP candidates in the 2015 general election.
In the EU referendum, 62 per cent of Scottish voters (around 1.2 million people) and every Scottish local authority voted to Remain in the EU. Only 38 per cent voted to ‘Leave’.
However, the EU referendum attracted only 67.2 per cent of eligible Scottish voters. Compare this to the 2014 Scottish independence referendum, when nearly 85 per cent took part and 55.3 per cent voted that Scotland should not be an independent country.
SNP first minister Nicola Sturgeon’s strong determination to remain in the EU could now force a tactical vote in the general election, with Scottish Unionists torn between a temptation to vote for independence – or for whichever party is likely to beat SNP.
How will the property market be affected?
The UK’s economy has remained strong since the EU referendum and within hours of Mrs May’s election announcement, the pound rose higher than it had in the previous two months against both the US dollar and the euro – with financial experts taking the optimistic view that this will continue in the next few months. Typically, an election would signal a period of uncertainty for the financial markets. However, history has shown that mid-term elections rarely cause damage to UK financial markets. A stronger mandate for Mrs May would be likely to bring more stability to the country so in the longer term is likely to bring better financial stability.
The property market is always stronger with stability and property experts are looking at the general election as a positive move for the property market.
There is usually a slow-down in property transactions in the six months prior to a general election. However, with a mid-term general election and only a few weeks in which to “wait and see”, there is unlikely to be as much of an effect on the property market.
After any election, there is historically an increase in the number of property transactions (of as much as 13 per cent within three months) due to renewed certainty.
Despite any uncertainty that might arise because of the general election, the UK’s increase in property values will likely continue to reflect the ongoing housing shortage, and continued growth is forecast by the industry.
Increased certainty in a Conservative Government with a new mandate can only have a positive impact on the UK property market. And investors may even use the short period of time before the election to campaign for positive changes within the property market, perhaps including stamp duty and phasing out certain tax reliefs.