One Month After the Election: Are We on the Verge of a ‘Starmer Spike’?
It's been a month since Sir Keir Starmer’s Labour Party secured victory in the UK election, ending 14 years of conservative rule. With such a decisive electoral mandate, early analysis suggested that the new government might bring much-needed stability and certainty, potentially leading to increased activity in the UK property investment market.
Current Market Conditions Amidst Inflation and Borrowing Costs
Despite initial optimism, the property market continues to grapple with high inflation and rising borrowing costs. These factors have led to a cooling period for house prices and a general slowdown in market activity. Investors and homebuyers alike are adopting a cautious 'wait and see' approach, delaying decisions due to the uncertain political and economic environment. However, some experts believe that, similar to the ‘Boris bounce’ seen after the 2019 election, a change in government might encourage investors to resume their property investment plans.
Potential for a ‘Starmer Spike’ in Property Investment
Historically, the UK property market tends to experience a surge in activity following a general election. For instance, after the 2019 election, Savills reported an increase in house sales, which they attributed to the clear electoral outcome and enhanced investor confidence. Sellers often list properties to capitalize on a post-election boost, while buyers are drawn to the perceived stability of a new government, leading to a temporary rise in property prices.
This year, even before the voting began, many sellers anticipated a Starmer victory and pre-emptively listed their properties, resulting in a 23% increase in listings. Estate agents were expecting an uptick in sales and house prices, with the market bracing for renewed demand and confidence driven by the new government’s focus on the property market.
Starmer’s Commitment to the Housing Sector
Addressing the housing crisis was a central theme in the Labour Party’s manifesto, with Keir Starmer pledging to build 1.5 million new homes over the next five years and to introduce a mortgage guarantee scheme. These initiatives are already in motion, with Chancellor Rachel Reeves outlining government reforms aimed at speeding up the construction of new homes, which is expected to boost both supply and demand in the property investment sector.
Signs of Rising Market Activity in Property Investment
Recent data indicates that market activity may already be on the rise. According to Home Sale Pack, there was a 6% increase in new sellers entering the market in the week following the election. Rightmove’s analysis shows that agreed sales over the past month were 15% higher than in the same period in 2023. Additionally, Zoopla reported 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.
Moreover, the Office for National Statistics (ONS) revealed that average house values increased by 2.2% year-on-year up to May 2024, compared to 1.3% in April. Although these figures are not directly linked to the election due to a two-month reporting lag, they represent the third consecutive month of price increases after eight months of declines, suggesting a rebound in buyer and seller confidence. This trend contributes to an increasingly positive outlook for property investments.
The Impact of Monetary Policy on Property Investment
While the early signs are promising, it may be too soon to predict a substantial post-election boost in the property market. The Bank of England’s (BoE) decisions regarding the base rate will likely have a more significant impact on the market than any new government policies. The cost of borrowing plays a crucial role in market dynamics, often overshadowing political factors. Consequently, brokers and investors will need to focus on monitoring economic indicators and shifts in monetary policy when developing their property investment strategies.
Regardless of political changes, it is essential for lenders to equip brokers and investors with the tools and resources needed to navigate the coming months confidently, ensuring that they can capitalise on any emerging opportunities in the buy-to-let and broader property investment market.
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