The Spring Statement – why no surprises is good news for property
With war in the Middle East, financial markets tumbling and the oil price surging, if ever there was a time for a Chancellor of the Exchequer to deliver a statement free of surprises to Parliament, it was today. Rachel Reeves (with the aid of the Office for Budget Responsibility, or OBR) achieved just that, which is good news.
Spooking the markets in the midst of such uncertainty could have been disastrous, but Reeves steered clear of any controversy in her Spring Statement, focussing instead on presenting the OBR’s latest economic and fiscal forecasts. The GDP growth prediction has been revised down for this year to 1.1%, but increased for 2027 and 2028 to 1.6% in both years. The unemployment rate, according to the OBR, has a little further to rise to 5.3% this year, but is projected to decline thereafter.
A particularly reassuring figure was the estimate that the Chancellor’s fiscal headroom is now £23.6 billion, up from £21.7 billion. While that is not a large increase, the important point is a closely watched metric moved in the right direction.
In the hours running up to the Statement, gilt yields and UK interest rate swaps were rising, as the markets cut bets on UK Base Rate cuts this year. Just a week ago, the financial markets were pricing in two cuts totalling 50 bps. This has been trimmed to one reduction of 25 bps. To the current tense backdrop, some additional bad news from the Chancellor could have been destabilising, so an unremarkable Spring Statement is well timed.
This brings us though to the elephant in the room – how seriously can any forecasts be taken at a time like this, with geo-political risks so elevated? If the coming days saw peace talks announced, market expectations on Base Rate cuts could potentially revert back to where they were before. Conversely, if the conflict becomes protracted, and energy prices become anchored at higher levels, the talk could switch to interest rate hikes. Quite simply, no one knows where the situation is heading.
For UK property in the short-term, this uncertainty is all too likely to send investors to the sidelines while events play out. However, over the medium to long term, there has been a huge reminder for global investors of what a safe country the United Kingdom is, tucked away in the peaceful northwest corner of Europe, with democratic countries as neighbours. Britain is also a country whose finance minister has just announced a slight improvement in its fiscal situation.
Being a safe haven country could be a sweet spot in global property investment in 2026 and 2027.
