Real estate investors welcome Labour victory in UK elections

Institutional Investors have welcomed the Labour Party’s victory in the UK elections, as they look for clarity and stability after a period of political uncertainty and upheaval.

Rick de Blaby, CEO of Get Living, said the election result provided much-needed clarity after a period of political uncertainty. “Now we quite simply need to get going,” he said. “We know it’s impossible to solve the country’s problems overnight, but as we find ourselves in the midst of a nationwide housing crisis, where new homes of all tenures are badly needed, what we urgently need is a grand vision and a comprehensive plan to fix this crisis, which recognises development as a force for good and enables us to attract the capital required to build.

“Everyone knows that our planning process is not fit for purpose and is holding the UK back from delivering at the scale that we could and should. We welcome any support that will help alleviate these issues, but are also mindful that with any increase in housing must come the essential infrastructure to support it. With this in mind, it will be interesting to see how Labour intends to progress its plans around new towns.

“On paper, this would help to bridge the gap but there are some concerns around the viability of these projects. My view is that, where possible, the industry needs to be using its expertise to deliver the substantial infrastructure required to create places that will stand the test of time.”

Justin Young, CEO of the Royal Institution of Chartered Surveyors, said: “As Labour prepares to appoint ministers in the coming days, and look to department structures, it’s vital that they bestow an urgency to translate the plethora of promises made over the last five weeks into sound and workable policy.”

Young said: “Delivering 1.5m homes over a five-year period will be no easy feat. To achieve this, the public and private sectors would be required to deliver 300,000 new homes a year – a figure not hit since the 1960s, which was a time when local councils played a far greater role in housing delivery. 

“Therefore, policymakers must introduce in a timely manner a programme of policies that speed up development and add significant resource to planning departments up and down the country. This will be particularly pertinent in Labour’s quest to achieve economic growth; many studies have agreed on the positive correlation between GDP growth and the availability of homes.

“If housing delivery is backloaded towards the end of parliament, then the electorate may not see benefits quickly enough.”

Nalaka De Silva, head of private markets solutions at Abrdn, said delivering growth to support public spending is a key priority for the new government, with planning reform expected to be a focus in the first 100 days in office. 

“We’re encouraged to see planning reform at the heart of policy priorities and hope this translates into swift, tangible reform and funding not only in the short term but with a long-term vision and stability. This is desperately needed to address the deep-rooted issues in the savings and pensions markets. By supporting the flow of capital into productive sectors, the UK’s comparative advantage can be maintained.

“In line with the productive finance initiatives, there is a role for directing more capital into domestic assets to support growth. We believe urban regeneration via large-scale real estate projects, specialist equity (growth equity and venture capital), social and economic infrastructure including renewable energy project assets have an important role in boosting the economy and providing investors with diversification.

Melville Rodrigues, head of advisory, real assets at Apex Group, said Labour aspires to restore economic growth to Britain. Its manifesto recognises the requirement for “an enduring partnership with business” to deliver growth. 

“Labour aspires to restore economic growth to Britain. Its manifesto recognises the requirement for ‘an enduring partnership with business’ to deliver growth. The real estate industry should embrace this offer of partnership and actively collaborate with the new government.”

Rodrigues said an “immediate action point” was to implement secondary legislation for the newly established reserved investor fund (RIF), while over the longer term pensions reform was critical to enable greater investment by defined contribution (DC) pension schemes in illiquid assets like real estate and infrastructure.

“UK fund managers will be able to use the RIF to unlock billions for regeneration of town centres, more social and affordable housing and progress on net zero goals. Furthermore, the RIF can attract UK and international institutional capital. This will be good news for managers, investors and government,” Rodrigues said.

“The longer-term project is pensions reform. Our pensions system is an international outlier, investing too little in real estate and other illiquid assets. DC pension schemes could invest more in illiquid assets. The government should unlock these savings to boost the economy and generate better returns for savers.

“Encouragingly, Labour has committed to reinvigorating our capital markets by reviewing the pensions and retirement savings landscape,” he added. “In the spirit of partnership, our industry must do its bit by demonstrating to pension funds and other savers that UK real estate will continue to generate both credible returns and perform as a key productive asset.”

Martin Towns, deputy global head of M&G Real Estate, said: “As part of a UK-listed entity with circa £40bn (€47.2bn) in assets under management, M&G Real Estate is ready to partner with policymakers to drive real estate renewal across the UK. By fostering a collaborative environment, we can ensure a prosperous and sustainable future for our real estate market.”

He outlined five key areas to “kick-start” such a renewal: “increase dialogue with the private sector and be visionary about funding mechanisms”; the creation of a dedicated UK investment agency; “a fundamental rewiring of the economic landscape built on a consistent long-term regulatory and legislative framework to provide stability for investors; reform of the National Policy Planning Framework, and an overhaul of business rates.

“The real estate sector is a significant contributor to the overall success of the UK economy, directly employing more than 1.2 million people and contributing circa £100bn to the UK economy every year,” he said. “We need a fairer and simpler system that doesn’t actively work against the viability of thousands of projects.”

Will Matthews, head of commercial research at Knight Frank, said: “Much has been said of Labour’s industrial strategy, but unlike the Inflation Reduction Act in the US this is not one of big spending promises, mainly because the fiscal capacity just isn’t there. 

“Looking at the manifesto, we can expect a relatively small investment into ports, supply chains, and green industries. Financial services is mentioned in a positive light. Labour has also recognised the importance of life sciences to UK growth, while data centres will be reclassified as nationally significant infrastructure projects, allowing planning decisions to be made by ministers rather than local councils.

“Critics, however, will argue that the plans lack the radical, transformative changes needed to achieve Labour’s ambitious target of the highest sustained economic growth among G7 nations. The underlying assumption is that economic and political stability, combined with targeted government backing in specific areas, will be sufficient to entice investors back to the UK, with knock-on effects for real estate demand.”           

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