"After the 2019 election, Savills reported an uptick in house sales and attributed the trend to the clear electoral outcome and increased investor confidence."
- Paresh Raja - Market Financial Solutions
It’s been a month since Sir Keir Starmer’s Labour Party secured victory in the UK election, marking the end of 14 years of conservative rule.
After claiming such a commanding electoral mandate, early analysis suggested the new government could provide some much-needed stability and certainty, leading some experts to predict a potential uptick in activity for the UK property market.
That said, the property market is still grappling with the aftermath of high inflation and rising borrowing costs – factors that have led to a cooling period for house prices and market activity.
Indeed, many investors and homebuyers have adopted a cautious 'wait and see' approach, delaying decisions amid the turbulent political and economic landscape. However, as we saw during the 2019 election’s ‘Boris bounce’, a change of government could inspire some investors to resume their plans.
The question now is whether we are on the cusp of a ‘Starmer spike’…
Expectations became reality
In years gone by, the UK property market tends to see a surge in activity in the weeks and months following a general election. After the 2019 election, for example, Savills reported an uptick in house sales and attributed the trend to the clear electoral outcome and increased investor confidence.
Largely, this is because sellers are quick to list their properties to take advantage of any post-election boost, while buyers are drawn in by the perceived stability of a new government. In combination, this can lead to a temporary rise in prices.
This trend began to unfold even before voting started in this year's election. With the Labour Party consistently leading in the polls and a Starmer victory anticipated, many sellers pre-emptively listed their properties, leading to a 23% increase in listings. Estate agents, in turn, were expecting an increase in sales and house prices.
The market was clearly bracing for a resurgence in demand, and the new government’s focus on the property market is likely to have invoked an additional sense of confidence.
Starmer is committed to the housing industry
The housing crisis was a key focus of the Labour Party’s manifesto, with Keir Starmer pledging to build 1.5 million new homes over the next five years and to implement a mortgage guarantee scheme.
These initiatives are expected to stimulate market activity and are already being put into action. For example, Chancellor Rachel Reeves has outlined government reforms aimed at accelerating the construction of new homes, which should boost both supply and demand in the coming months.
Market activity is on the rise
There are signs that market activity may already be on the rise. Data from Home Sale Pack reveals a 6% increase in new sellers entering the market in the week following the election. Meanwhile, Rightmove's analysis indicates that agreed sales over the past month were 15% higher compared to the same period in 2023.
Additionally, Zoopla's latest figures show that half of all UK homes appreciated by at least 1% in the first half of this year, marking the highest six-month growth since December 2022.
Furthermore, ONS data shows that average house values increased by 2.2% year-on-year up to May 2024, compared to 1.3% in April. Admittedly, these figures are not directly linked to the election due to a two-month reporting lag, but the data represents the third consecutive month of price increases after eight months of annual declines. This suggests that there is a clear rebound in buyer and seller confidence that only adds to the increasingly positive outlook for property investments.
Together, these indicators imply that the housing market is positioned to benefit from the new government. A survey by the Royal Institution of Chartered Surveyors (RICS) supports this, showing that 20% of property professionals anticipate a recovery in home sales within the next three months.
Why the base rate may be of more importance
In reality, it might be premature to determine if the market will see a substantial post-election boost, especially as the Bank of England (BoE) begins to lower the base rate. Indeed, the BoE's decisions in the coming months are likely to have a more profound impact on the market than any policies introduced by the new government.
The cost of borrowing generally has a more significant effect on market dynamics than political decisions. Consequently, for brokers and investors, the main focus when developing investment strategies will likely remain on monitoring economic indicators and shifts in monetary policy.
Come what may, lenders must equip brokers and investors with the necessary tools and resources to navigate the coming months with confidence.
