Eight weeks after the snap UK General Election, and just over a year into Theresa May’s premiership, it seems like an apt time to take a look at whether domestic political events have an impact on the performance of the commercial property market.

Looking at the most recent general election cycle, as of July 2017 prime UK yields had not moved for three months and investment levels remained steady, with investment volumes for the first of 2017 actually slightly exceeding those seen in the equivalent period in 2016. The relative security of UK property, plus the currency discount available to overseas buyers, appears to have continued to attract investors despite lower return expectations.

It is also worth remembering that what we in the UK may perceive as ‘turmoil’ on the domestic stage may pale into insignificance relative to many global political events. A few days' delay in forming a Government is not necessarily perceived as a major issue by international investors (particularly those that originate in the Middle East) when ultimately the UK’s political system remains stable and accountable.

But is the steady state of affairs we’re seeing this year the usual outcome post-general election?

We’ve analysed the total returns of UK property over the first 12 months following the appointment of the last five Prime Ministers, and found that some Prime Ministers are luckier than others in terms of what stage of the property cycle they inherit.

UK property total returns over the first 12 months of five Prime Ministers

Source: MSCI, Savills

Theresa May has seen a positive 5 per cent total return outcome over her first year in Number 10. This shows that, despite the unexpected outcome of the EU referendum, the market views the UK more positively now than when John Major and Gordon Brown inherited much weaker economies in 1990 and 2007 respectively.

Total returns are expected to be around 5.5 per cent for UK commercial property in 2017 and improve throughout the next five years. The RealFor predictions show that total returns should average 6.5 per cent per annum, with the industrial market out-performing at around the 8 per cent level.

While the forecasts are predicting a lower return environment across the spectrum of investment sectors for 2017, uncertainties from the various worldwide political changes may create some localised volatility, particularly as the reality of Brexit negotiations become more apparent. However, the higher income returns from UK property relative to other investment options look set to maintain its attraction from a wide pool of investors.

Further information

Read more: UK Commercial Market report