Published: 23/01/2020It’s safe to say that no matter what side you were on, the December 2019 election was fraught, with promises being made left, right and centre. But now that the Conservatives are in power under a Boris-led Government, just what can we expect from housing this year?
Somewhat tellingly, post-election house price growth following the last two elections were the highest they’ve been for 20 years, according to a report by Property Investment firm, SevenCapital. So, how does an election today affect the property market in general?
Historically, prices tend to increase in the month leading up to an election, with this trajectory continuing long after the votes have been counted. In fact, data from the Land Registry House Price Index suggests that this typically continues for six months, before quickly accelerating. The reason behind this is simple: The housing market – along with most others – reacts fundamentally on the level of certainty an event brings.
If an election itself, therefore, is enough to positively impact the property market no matter the outcome, can we expect an even better result now that the Conservatives are in power? To many in the property industry, a ‘super bounce’ is on its way – with some reports already claiming this is in effect - but what exactly does it mean? According to Ian McKenzie, CEO of The Guild of Property Professionals, this translates to a “bounce in confidence and activity”.
The Brexit effect
When it comes to certainty – or lack of it – you don’t get more relevant than Brexit, and the date to leave has been set for January 31st. “For the property market, this is good news”, Damien Siviter, Group Managing Director at SevenCapital believes. It wasn’t that long ago, after all, that the Royal Institute of Chartered Surveyors (RICS) was describing the housing industry as “haunted” and “subdued”. “The uncertainty over the past few years as we remained in this limbo of ‘are we, aren’t we going to leave’ has had a knock-on effect, hindering some projects which in a normal situation would have gone ahead with little issue and causing hesitation from investors”, Damien is reported to have said.
However, just how positive remains to be seen, until a trade deal is agreed with the EU and economic certainty is achieved.
Once a trade deal has been reached, the pound should strengthen progressively, acting as a catalyst for an increase in house prices over the next five years in London. The general prediction is a 2-4% boost, in contrast with the 1% that has plagued the sluggish economy over the last few years. But again, it depends on what kind of trade deal – if any – is agreed with Brussels.
Another key concern that’s been surrounding the housing market for quite some time is residential undersupply which – again – can be partly blamed on the lack of certainty which has caused many sellers to hold back. Hopefully, this issue will become partially resolved as people regain confidence. As Miles Shipside from Rightmove reportedly predicts, we can expect to see “some release of several years of pent-up demand.”
The Conservatives have also pledged to build a million more homes over the next five years, although challenges around labour and building materials shortages – as well as planning permission – remain.
Some buyers might hold out for a cut in Stamp Duty that was floated by Boris Johnson during his summer leadership campaign, in which he pledged to increase the threshold at which the tax kicks in to £500,000 and reduce the top rate from 12% to 7%. However, it was noticeable by its absence in the Conservative Party manifesto in the lead up to the election. One widely anticipated change is the introduction of an extra 3% surcharge for overseas buyers of residential properties. If this does happen, they will no longer be able to buy homes as easily as those who live here. Either way, all should be revealed in the upcoming March Budget.
The Conservatives have been pretty intent on increasing home ownership throughout the country – particularly for first time buyers. Included in their promises were getting banks and building societies to offer longer-term fixed rate mortgages. Let’s hope they make good on that promise!