The Conservative Party has won a majority of just under 80 seats in the UK general election. As a result, the UK is likely to leave the European Union on 31 January, with a vote in Parliament and a Queen’s Speech expected before Christmas.
The sales market will see growth in both demand and supply … but will remain price sensitive
The result will, for the time being, end the uncertainty of a no-deal Brexit and pave the way for the release of some of the pent-up demand that has built in the housing market in recent years. The extent to which this translates into transaction activity in the short-term will depend on the size of pricing expectations between buyers and sellers.
Supply is likely to rise in the short to medium term as vendors anticipate stronger market conditions. However, while some may expect these conditions to support higher prices, growth in supply will temper this somewhat. Accurate pricing will remain key to securing sales.
Rental supply shortage
The current shortage of supply in the prime London lettings market may be further exacerbated as owners attempt to capitalise on any perceived ‘bounce’ and list their property on the sales market, which could put upwards pressure on rental values.
Tax proposals and the pound may encourage buyers to act
The first Budget for the new government is expected in February. The prospect of future tax changes – in particular the proposed additional rate of Stamp Duty for non-resident buyers – may prompt some purchasers to accelerate their plans in coming weeks.
At the same time, sterling rose to about $1.34 in early trading this morning – which compares to $1.21 in August this year. Some analysts believe it will climb as high as $1.40 as the threat of a disorderly Brexit recedes and inflows of pent-up private capital and higher levels of public spending stimulate the economy. Some buyers may be encouraged into the market as a result.
Finance costs may begin to rise in the medium term
Even if we accept that Brexit is likely to create some short term economic uncertainty, interest rates are likely to begin a slow but gradual process of normalisation in 2020. This means that the window for locking in current ultra-low mortgage rates could begin to close – again a process which may encourage buyers to accelerate their plans.
First-time buyers will be a key policy focus for the new government
The Conservative Party has said it will refocus its efforts on home ownership, particularly for first-time buyers. Though the manifesto reiterated the Help to Buy Equity Loan Scheme would be scaled back in 2021, subsequently ending in 2023, it pledged a review of methods to support home ownership follow its completion.
It is also worth bearing in mind the potential impact in Scotland in the medium-term as a big SNP win looks likely to increase pressure for a second independence referendum.