As Sir Keir Starmer prepares to step into Number 10 after a landslide Labour victory, will the outcome have any major impact on the UK housing market?
After 14 years of Conservative rule, the Labour party will now take the helm at Downing Street. All the parties have made promises regarding what they will do for the housing market, so now it is up to Labour to push ahead with its plans.
Interest rates have a bigger impact
In terms of how general election outcomes have historically impacted the property sector, it seems there are much bigger issues at play affecting the market than who is in power at the time. However, there is much speculation that, much like the ‘Boris bounce’, today’s outcome could provide a boost in confidence.
Under a Labour government between 1997 and 2010, house prices increased by around 176%, according to the Office for National Statistics, although this does take into account the dip that happened as a result of the 2008 financial crisis.
Under Conservative leadership – including the period of the Conservative-Lib Dem coalition between 2010 and 2015, house prices increased by 64.7% over the 14-year period between 2010 and 2024, from from £170,846 in May 2010 to £281,373 April 2024.
David Fell, lead analyst at property firm Hamptons, commented: “In the short term, it’s likely to be Threadneedle Street – The Bank of England – rather than Downing Street which will have the greater influence on the market.
“Higher mortgage rates are likely to keep a close cap on house prices over the course of at least 2024.”
What has Labour promised?
- Housebuilding: Labour has promised to build 1.5 million homes across the country over the next five years. In order to hit its target, Labour has also promised to reform the planning system to make it easier to get permission to build, with immediate effect.
- Where it will build: The Labour manifesto states that it will take “a brownfield first approach, prioritising the development of previously used land wherever possible, and fast-tracking approval of urban brownfield sites”. However, it adds: “But brownfield development alone will not be enough to meet our housing need. Labour is committed to preserving the green belt which has served England’s towns and cities well over many decades. Under the Conservatives, greenbelt land is regularly released for development but haphazardly and often for speculative housebuilding. Without changing its purpose or general extent, Labour will take a more strategic approach to greenbelt land designation and release to build more homes in the right places. The release of lower quality ‘grey belt’ land will be prioritised and we will introduce ‘golden rules’ to ensure development benefits communities and nature.”
- Stamp duty: Part of this will include funding additional planning officers, which Labour says will be paid for by increasing stamp duty for non-UK residents. At the moment, property investors from overseas must pay the standard rate of stamp duty based on the price bracket the property falls into, as well as a 2% surcharge. The manifesto states: “We will ensure local communities continue to shape housebuilding in their area, but where necessary Labour will not be afraid to make full use of intervention powers to build the houses we need.”
- Improving infrastructure: “The current planning regime acts as a major brake on economic growth. Labour will make the changes we need to forge ahead with new roads, railways, reservoirs, and other nationally significant infrastructure. We will set out new national policy statements, make major projects faster and cheaper by slashing red tape, and build support for developments by ensuring communities directly benefit. We will also update national planning policy to ensure the planning system meets the needs of a modern economy, making it easier to build laboratories, digital infrastructure, and gigafactories. Labour will ensure economic regulation supports growth and investment, promotes competition, works for consumers, and enables innovation.”
- Mortgage guarantee: Labour has said it will replace Help to Buy with the ‘Freedom to Buy’ initiative, which aims to help around 80,000 people onto the property ladder, according to the Labour manifesto. The policy is aimed at families who struggle to save for a large deposit for a property and can’t rely on cash gifts from relatives via a permanent mortgage guarantee scheme. It would make the current mortgage guarantee scheme a permanent initiative, which sees the government act as a guarantor for people’s mortgages.
- Rental reform: This is a big one among most party leaders, with most of them pledging to make some big changes to the private rented sector – particularly regarding eviction rules and discrimination. Labour has followed suit, promising to scrap Section 21 no-fault evictions “immediately”. Elsewhere in the private rental sector, the Labour manifesto committed to “prevent private renters being exploited and discriminated against, empower them to challenge unreasonable rent increases, and take steps to decisively raise standards”.
Comment from the industry
Matt Thompson, head of sales at Chestertons, says: “Labour’s announcement to lower the stamp duty threshold for first-time buyers from £425,000 to £300,000 in April 2025 has left many wondering if the party will introduce any major initiatives that will make it easier to get on the property ladder.
“Buyers will be looking for Labour to fulfil its pledge to introduce the Freedom to Buy scheme but are concerned that buying a first home continues to be challenging.
“Labour’s plan to increase the already higher stamp duty rate on purchases of residential property by non-UK residents by 1% is unlikely to have a major impact on London’s property market. The capital remains a global city that attracts international professionals and investors who will simply adapt their property search by lowering their budget or by buying in a part of the city where they get more property for their money.”
Adam Jennings, head of lettings at Chestertons, says: “Labour promised to scrap Section 21 ‘no fault’ evictions on day one of the new government which tenants would have seen as one of the party manifesto’s stronger pledges. Especially after the Renters Reform Bill was abandoned when a snap General Election was called, many were left wondering if Section 21 will be scrapped any time soon at all.”
Nigel Bishop of Recoco Property Search says: “Labour’s manifesto pledged to improve the UK’s housing market and the party will be under immense pressure to deliver. One promise was to build 1.5 million homes and we are interested to learn more about Labour’s plans to utilise “poor quality” green belt areas as this will likely be met by protests from some local residents and organisations.
“Labour’s pledge to levy VAT on school fees has been labelled one of the party’s more controversial ones. This will leave many parents unable to afford private school education and inevitably impact on the property market by boosting demand for properties in close proximity to good state schools. Properties in these catchment areas can already ask a 20% premium and a politically-caused boost in demand for such homes will create an even more competitive market for buyers.
“In the run-up to the General Election we already saw house hunters, who previously paused their activity to observe the political development, resume their search. Now that a party has been elected and economists predict a likely interest rate cut over the coming months, we expect further buyers to follow suit. ”
Paresh Raja, CEO of Market Financial Solutions, said: “The accepted logic is that elections bring uncertainty and are therefore bad news for the property market.
“But there have been some important differences this time around: Rishi Sunak called for the vote to take place a lot earlier than expected, and the result (a Labour victory) has seemed highly likely from the off. As a result, there has been less uncertainty than there could have been, and now the ballots have closed, we should see a prompt return to more stable, ‘business as usual’ conditions.
“There are enough signs to suggest the market is ready for a post-election uptick in activity. The number of homes coming onto the market in the first half of 2024 is 22.9% higher than last year, while economists are still predicting that the Bank of England will cut the base rate twice before the end of the year, with the first potentially coming on 1st August.
“But, despite these reasons for optimism, there is clearly no room for complacency. Political and economic turbulence remains, so lenders have to focus on supporting brokers and borrowers as best they can. Optionality and flexibility will be key in the second half of this year, and lenders have to commit to providing borrowers with the financial products they need to both benefit from any opportunities that a potentially more stable climate could provide.”
