Interest Rate Cuts Seen as More Crucial for Housing Market Than Upcoming Election

Interest Rate Cuts Seen as More Crucial for Housing Market Than Upcoming Election

Affordability is a more critical factor for homebuyers than the upcoming General Election.

Despite Prime Minister Rishi Sunak scheduling the election for 4 July, which might lead to hesitation among buyers and sellers awaiting potential housing policies from the new government, head of residential research, Lucian Cook, suggests that the impact of interest rate cuts will be more significant.

Cook stated, "The fall in headline inflation to 2.3% as of April suggests two or three bank base rate cuts this year. This will likely stabilise mortgage markets in the short term, with borrowing costs potentially decreasing as the year progresses. With a shorter-than-expected lead-up to the election, buyer demand could increase in the autumn, as uncertainty diminishes."

A survey conducted in March by London based Savills indicated that 79% of respondents in the high-end property market were indifferent to the election's influence on their decision to move within the next 12 months. Cook noted that while prime property buyers might face higher taxes and targeted measures, domestic buyers are generally prepared for these changes. He added that concerns over wealth taxes have not reemerged, and the primary uncertainty lies in the tax treatment of non-doms, which could affect the prime central London market.

Cook also mentioned that while a change in government might not significantly alter the macro-economic environment, Labour's ambitious plan to deliver 1.5 million homes over five years could eventually reshape the housing landscape. However, this is unlikely to affect the market in the immediate term.

Concerns persist regarding property-related legislation, such as leasehold and rental reforms. Paula Higgins, CEO of the HomeOwners Alliance, urged the government to prioritize Leasehold Reform, highlighting its practical importance for both prospective buyers and current leaseholders awaiting clarity on lease extension costs.