NEWS: How Will a Labour Government Affect the UK Property Market?

With Labour in government for the first time in nearly 15 years, many Britons are wondering how this will affect the property market.

Historically, general elections have not had extreme impacts on the housing market, but a clear electoral mandate can boost buying confidence. Issues raised during and after an election can sway consumption trends, impacting spending and saving behaviour. Election outcomes can also shift expectations about inflation and interest rates, influencing borrowing costs and investment.

Furthermore, international perceptions of the UK economy, shaped by political stability and economic policies, can affect foreign investment and trade relations. The overall impact of a general election on the UK economy hinges on the winning party's policies, post-election political stability, and businesses' and consumers' reactions to these changes.

Data shows that in the week leading up to the recent election, 45,724 homes were listed for sale in Great Britain. This number rose by over 3000 in the week following the election, marking a 6% increase and a combined home value of nearly £13.8 billion. The Yorkshire & Humber region experienced the most significant post-election surge with a 10.2% rise in new listings, followed by the South East, London, the South West, West Midlands, and Scotland.

The Royal Institution of Chartered Surveyors (RICS) UK residential survey for June reflected cautious optimism. Although market activity remained subdued, potential easing of monetary policy by the Bank of England and a clear electoral mandate placing housing high on the political agenda could support a recovery.

Prior to the election, the housing market struggled with falling sales, declining prices, and fewer new sellers. Chancellor Rachel Reeves emphasised the government's focus on increasing homeownership and the need for affordable housing, including social rent, highlighting the crucial role of the private sector.

Despite these challenges, there are signs of market recovery. HMRC data revealed a fourth consecutive monthly rise in house sales in April, with a 5% increase to 90,430 transactions. This follows a slight increase in mortgage rates earlier in the year, which temporarily slowed the market.

A study by the Institute for Fiscal Studies (IFS) reveals that average incomes grew by just 6% from 2009-10 to 2022-23, a stark contrast to the 30% growth expected before the financial collapse. This stagnation poses additional challenges for homeowners and prospective buyers.

Labour’s election manifesto proposed a 'Freedom to Buy' scheme aimed at helping 80,000 young people onto the housing ladder over the next five years. This scheme would make the current mortgage guarantee scheme permanent, incentivising lenders to offer high loan-to-value mortgages by acting as a guarantor for those unable to afford large deposits.

Labour has also pledged to reduce the first-time buyer stamp duty threshold from £425,000 to £300,000 and to raise stamp duty on residential property purchases by non-UK residents by 1%. Additionally, the party plans to continue scrapping non-dom status, which could deter foreign investment but potentially boost domestic supply and demand.

The new government aims to build 1.5 million new homes, a goal that faces significant challenges, including green belt issues and stringent planning departments. However, success will require substantial resources, investment, and cooperation from local authorities.

How Will the Election Affect the Buy to Let Property Market?

Slow growth in the rental market has led many landlords to question the viability of buy-to-let investments. Many of them are apprehensive of what's to come with the new government. It's possible the buy-to-let market could see volatility under Labour.

Traditionally, the Conservatives have advocated for the property investors in attempt to stimulate growth in the property market, however in the past two years, high borrowing costs and regulatory changes have negatively impacted the rental sector. In the past, Labour have championed stricter regulations on private renting in attempt to safeguard tenants, but Keir Starmer's party's more centrist policies don't necessaily mean the squeeze will tighten on landlords.

However, the Renters Reform Bill, aimed at abolishing Section 21 'no-fault' evictions, was progressing through parliament before the election. Landlords are critical of Labour's manifesto promise to "immediately abolish" no-fault evictions.

Despite these challenges, there are signs of resilience in the housing market. Nationwide reported a modest bounce back in UK house prices at the end of May, following two months of declines. The market's ability to withstand various pressures will be crucial as the new government’s policies take effect.

House Prices Have Grown More Under Labour in the Past

Our new research shows that in the past 50 years, house prices have grown 3% more under a Labour government under the Conservatives. 

Key Findings:

1. House prices have grown more under a Labour government than under Tory leadership over the last 50 years.

2. Average annual house price growth under Labour since 1954: 9.45%

3. Average annual house price growth under Conservatives: 6.45%

4. Labour has a higher growth rate despite Labour being in power during the 08 financial crash, and the Tories being in power during the Stamp Duty Tax holiday in 2020 that caused a small house price boom.

The study, which analysed data from the Nationwide House Price Index since 1954, compared property price trends with political leadership over the same period. Labour governed for 19 of the 50 years analysed, while the Conservatives held power for 31 years.

Since 1954, we have seen the average property price increase from £1,853 to £281,000.

Want to know more? Contact us to get access to how you can benefit.

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