Liz Truss has resigned as prime minister.
Following a turbulent and chaotic 45-day period in office, the shortest for any UK prime minister, Truss told the nation in front of 10 Downing Street that she was unable to "deliver the mandate" on which she had been elected by Conservative Party members.
A Conservative leadership election will now be held within the next week, and Truss will remain as prime minister until a successor is chosen.
Truss said she had come into office at a time of "great economic and international instability". The problem for Truss is her period in office has only led to greater economic and political instability, sparked most clearly by the "mini Budget" on 23 September.
The tax-cutting "pro-growth" Budget prompted the pound to crash alongside massive financial interventions from the Bank of England as Truss's government struggled to salvage credibility with financial markets and voters alike.
Since then, the party has been increasingly riven by dissent at their leader's decisions. Truss sacked her Chancellor of the Exchequer and close ally Kwasi Kwarteng on 14 October in a bid to persuade her parliamentary party and the country that she could move forwards from the damage.
Her stepping-down however follows angry, chaotic scenes in the House of Commons on Wednesday night over a vote on fracking that made her position effectively untenable.
Muted Financial Response
While financial markets have clearly been keen for Truss to go, the response to the news so far has been muted with the pound rising initially in the immediate aftermath of the statement before settling back at around $1.12.
Real estate stocks, as with the wider FTSE market, have taken a battering during the past weeks of turmoil under Truss's government, but have spiked slightly higher on Thursday as it became clear the prime minister was resigning.
Segro was up 1.2% to 724p by 2.06pm on trading at the start of the day, Landsec was up 1.71% 524.40p, and British Land was up 0.44% at 342.60p.
Truss's turbulent, tiny period in office could not have been predicted when she took on the role of prime minister.
The seeds of her troubled time can be seen in this CoStar News review of her likely attitudes towards real estate, business, and economic growth.
Most significantly for real estate, and for Truss's subsequent actions, she is a fierce proponent of free trade and entrepreneurship. In 2012 she co-authored Britain Unchained, a manifesto that argues for a more meritocratic Britain and less "idling" by workers. In 2017 she was a key figure in the launch of the free market trade group Freer and has consistently lambasted "nanny-state" regulations and argued against raising taxes. Alongside predecessor Boris Johnson she formulated a policy to cut taxes for people earning over £50,000 a year.
Economic Approach
Such beliefs, with Truss often referred to as a "trickle-down economy" ideologist, led her to speedily introduce an anti tax, pro-growth Budget that fundamentally misjudged the global mood as well as that of the country. The decision to go ahead with the Budget without rigorous number-crunching to back up the proposed increased expenditure and tax cuts was a fatal error.
Real estate, as with the wider country, will be seeking some certainty on who the next Tory leader is, and where their political leanings lie. The short tenure of Truss signals that the country may not be not prepared for a certain kind of right-of-centre Tory.
Build to rent specialist Moda Living's planning director James Blakey was philosophical that markets could now move forward: “The politics of recent weeks has been extraordinary, but let's remain optimistic that we can draw a line under it and move forwards. The UK is in desperate need of a stable government and a prime minister who will focus proactively on addressing the housing crisis which is impacting on so many lives.”
Ryan Jones, partner in rating at Cluttons, said: "Business rates need to be looked at again and in depth. Over the past three years, businesses have faced many challenges from Brexit to COVID ... now is the time to help them flourish and enjoy a prolonged period of operation during a time when the British public are embracing physical retail and getting to grips with the return to the office. We believe smaller businesses should take priority, but we must also not forget the pension funds and public sector bodies that also own and occupy real estate and who have a duty to ensure finances are protected to support real people in the long term.
Jonathan Harris, chief executive of Harris Associates, a property investment agency and asset manager, said: "We are witnessing an immediate positive bounce in the sterling with Government bonds "gilts" falling as the market has calmed on the news of Liz Truss’ resignation. We believe the departure of the prime minister will restore confidence in the real estate market after desperate need for stability. Within the next week a new prime minister will be appointed with their main objective to re-assure investors on the UK economy.
"We anticipate activity closing 2022 from family offices who may have been previously outpriced, private equity funds on an unleveraged basis and international buyers who will benefit from the weak pound. We are already seeing substantial interest from our Singaporean partners."
Looking forward to 2023, we are encouraged that interest and activity will re-emerge in our new political and economic world, underpinned from robust tenant demand.”