Andy jalil –
Aminority government creates a period of uncertainty for the UK as it cannot be said how successful the Conservative government will be in a coalition and whether such a coalition would last long. The uncertainty caused by the General Election and Brexit had already put the brakes on the housing market, and activity is likely to remain subdued until the outlook is clearer.
Chairman of estate agents, Jackson-Stops, Nick Leeming, said, “All markets abhor uncertainty and the housing market — which at present has slowed down and also seen rents drop — is no exception. The priority now must be for politicians to provide reassurance by forming a stable government — which, in fact, it already had prior to Theresa May calling the snap General Election in the hope of getting a bigger majority to strengthen her hand in Brexit negotiations — as quickly as possible.
The appointment of Alok Sharma as the new Housing Minister in the Prime Minister’s reshuffle, in place of Gavin Barwell, one of the casualties of the General Election when he lost his seat to Labour, will help to remove some uncertainty over how soon measures outlined in the Housing White Paper, published as far back as February, will be put into action.
Just how important the shortage of housing in the country is, has been reflected in the fact that all of the main political parties made housing a priority in their manifestos.
The Liberal Democrats promised to build 300,000 new homes a year, while Labour pledged to build 100,000 council and housing association properties annually. The Conservatives claimed they would deliver one million by the end of 2020, with a further 500,000 by the end of 2022. Their commitments suggest the issue will remain high up the political agenda.
A SOFTER BREXIT
Prime Minister May went to the polls to get a strong mandate for a hard Brexit. But her failure to increase her majority suggests the country does not back her plans. Expectations of a soft Brexit are likely to be good news for the housing market. Not only does it remove some of the current uncertainty, a soft Brexit is likely to include ongoing freedom of movement. This should support demand for UK property and, in turn, house prices.
Opposition leader Jeremy Corbyn’s Labour party did surprisingly well in the elections and the increase in support for Labour has been attributed to young people coming out to vote. Former residential chairman of Royal Institute of Chartered Surveyors, Jeremy Leaf said, “The hopelessness we are seeing on the ground about not being able to get on the housing ladder has come through. If there is one message that has come out of this election, it is that the young have voted overwhelmingly for change.”
He said politicians would now have to consider the needs of the young more than they had in the past, which could mean more help for first-time buyers. Despite the current uncertainty, the housing market continues to be supported by strong fundamentals.
The economy has performed better than expected in the months since the Brexit vote, employment levels remain high and interest rates are at record lows.
Chief executive of mortgage broker SPF Private Clients, Mark Harris, said that while swap rates (on which fixed rate mortgages are priced) can be “pretty volatile in response to bad news” it does not necessarily follow that mortgage rates will rise. He said: “The oversupply of money will likely continue to keep mortgage rates low at least in the short-to-medium term.”
At the same time, the fact that the UK is failing to build enough new homes to keep pace with demand should prevent a significant fall in property values.
The housing market has lost momentum in recent months and while some commentators have attributed the slowdown to uncertainty caused by the General Election, others have suggested different factors are at play.
House price growth has significantly outpaced increases to earnings in the past few years, leading to affordability becoming increasingly stretched. As a result, the current lull in activity may be caused by buyers waiting for earnings to catch up with property values. Until the UK increases the rate at which homes are built, transaction volumes may remain subdued, regardless of what is going on in politics.