This week, Prime Minister Rishi Sunak announced an earlier than expected general election, which will take place on Thursday 4th July. How could this affect the UK housing market?
The UK’s political parties have already begun gearing up for their election campaigns following Rishi Sunak’s revelation on Wednesday, in what was seen as an unexpected turn of events. The prime minister had previously insinuated the general election would be held in the second half of the year, although the beginning of July is still sooner than many had anticipated.
It means parliament will be dissolved on 30th May, leaving a relatively small window for any final pieces of legislation currently underway to be passed. Any bills that do not make it by the deadline are likely to be abandoned, as they cannot be carried over.
In terms of how the election is likely to affect the UK housing market, there have of course been a wide range of mixed reactions from the industry. It was an inevitable scenario, though, but it could see a huge shift in policy if the Conservatives do not secure another term – and the polls are leaning firmly towards Labour gaining power.
Could the general election affect house prices?
Earlier this year, Winkworth published a report, with data compiled by Dataloft, looking at the impacts previous general elections have had on the UK housing market and property prices since May 1997.
Overall, it found that pre-election uncertainty had a short-term impact, causing the number of sales in the months leading up to polling day to slow down. In six out of the last seven general elections, this is what happened.
However, once the vote has been cast and the new ruling party announced after the general election, this turbulence tends to be short-lived, according to the report, as new policies and sometimes a new direction boost the level of certainty and confidence in the market once more, meaning house prices and activity picks back up.
As Dominic Agace, chief executive of Winkworth, pointed out, the research found that the biggest house price growth in the UK housing market came when Tony Blair (Labour) was in power.
“We saw a rise of £48 a day on the average property price, which is contrary to popular belief that the Thatcher era saw the biggest growth due to Right to Buy,” he said.
Agace added: “With positive news in the offing and a New Labour version of the Labour party being proposed, we don’t expect significant disruption. Interest rate cuts are expected and growth upgrades for the UK paint a picture for an improving property market this year after an already positive start.”
What about legislative changes?
The Renters Reform Bill – perhaps one of the biggest legislative changes likely to affect the private rented sector in many years – is currently at Committee Stage in the House of Lords. This Bill proposes a ban on “no fault” evictions, more rights for renters with pets, and major changes to tenancy agreements, among other things.
Savills believes that the chances of this Bill being passed before parliament is dissolved are low. However, both Labour and the Conservatives have advocated for reform within the private rented sector, so there is the potential for many aspects of the Bill to go ahead regardless of who wins the general election.
Lucian Cook of Savills believes it is a case of “when” not “if” assured shorthold tenancies are abolished across England and Wales, although it remains to be see how the new regulations are introduced, and what the balance will be between protecting landlords and protecting tenants.
“In that respect, close attention is likely to be given to the potential impact on the availability of homes to rent in an already undersupplied market,” he said.
UK housing market will be on all agendas
When the major political parties come to set out their manifestos for the general election, it is safe to say that the UK housing market will be one of the big focal points. There are some similarities and some big differences in the way each party plans to tackle the various issues, though.
Boosting the country’s housing supply is something that both Labour and the Conservatives seem to agree is a priority, so this is likely to be discussed further by Keir Starmer and Rishi Sunak as we approach the general election.
Nathan Emerson, chief executive of Propertymark, points out that housing is a “cornerstone for every single community across the UK”, adding: “It’s the foundation to a strong economy, and must be a key theme that all political parties are placing front and centre of their general election campaigns.
“Many successive governments have failed to keep pace with demand, and we would encourage potential policy makers from all sides to place a rejuvenated emphasis on tackling current issues and meeting future demand.
“There must be a sustainable mix of housing solutions for both buyers and renters, as well as a commitment to ensuring the UK leads regarding, innovation, quality, and environmental sustainability.
In addition, any new government must ensure there is comprehensive support in place for first time buyers to prevent the prospect of home ownership being out of reach, but equally ensure the housing market remains balanced for all.
“It is also important there is a full scale commitment to ensure wider infrastructure is also planned for, as we witness an ever growing population.”
