Posted on: August 30, 2024
How will the new Labour Government change the property market?
The Tories are now resigned to sitting on the opposition benches and Labour have come to power with a landslide victory and a majority Government. But what will they do to boost the property market?
The Conservatives introduced Help to Buy incentives, which although popular are largely now not in existence. Labour has pledged to make permanent the mortgage guarantee that currently exists in a temporary capacity. This helps lenders provide high loan to value mortgage products, particularly to first time buyers.
On the 1st of April Nationwide Building Society wrote that high interest rates were stifling affordability and that prices in the last 12 months were broadly flat. It is no secret that interest rates need to drop in order to boost the housing market, but whilst current policy is to keep inflation at 2% this is the job of the Bank of England. I guess labour could look to change this policy, but there is no indication this benchmark will change. In fact in their election manifesto they have pledged a strict set of measures to keep inflation low, boost growth and give wriggle room for reducing interest rates. We wait to see whether this will be delivered. So whilst a drop in interest rates is forecast for later this year, this is subject to change and dependent on inflation data and the Bank of England Monetary policy committee.
Labour and the property market
Labour is pledging 1.5 million new homes in the first five years of government. This includes new towns, better infrastructure, options for affordable housing and options for first time buyers*. Whilst this is encouraging, this policy mirrors the Conservative pledge of 300,000 new homes per year, the latest data from an article by Building.co.uk indicates only 234,000 homes were built in 2022/2023. I have written about building policy challenges before and with a lack of construction workforce to meet the demand, planning challenges, interest rate challenges and of course NIMBY’s it remains to be seen whether this benchmark can be achieved.
In my opinion the key to all of this is lower borrowing costs. Without the reduction in mortgage and borrowing costs I don’t believe builders will have the incentive to invest and build, and if they do, the demand will be stifled by affordability challenges.
*Source Labour election manifesto 2024
https://www.bbc.co.uk/news/articles/cp081z9vre4o
01/09/2024
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The information contained within was correct at the time of publication but is subject to change
This is just an overview of the current housing situation and does not constitute advice. If you require specific mortgage advice, please speak to one of our advisers…….
Craig Power craig.power@villagefs.co.uk
Or Luke Spires luke.spires@villagefs.co.uk
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