What impact will the new PM have on the UK housing market?
The occupant of Number 11 Downing Street rather than the new housing minister will have a bigger role to play between now and the next election.
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The UK’s new Prime Minister will be announced later today and it’s likely to be Liz Truss.
If it’s Rishi Sunak, forming a new cabinet will not be straightforward.
What will it mean for the housing market?
First, you can expect the usual gnashing of teeth as the tally of housing ministers in recent years is likely to rise by one.
Some will also read between the lines of what the winning candidate has said about the property market on the campaign trail.
I’m not sure either really matters this time - if they ever did.
How the new government deals with the cost-of-living squeeze will have a greater impact than the latest headline-grabbing initiative designed to unleash a wave of housebuilding across the country.
Financial markets (and Rishi Sunak) are already feeling jittery about Liz Truss’s proposed support package for the economy. Tax cuts could stoke inflation, send interest rates higher and damage the economy, her opponents have warned.
With inflation already in double-digits, the stakes are high and management of the economy will be the most critical issue for the housing market between now and the next election. In other words, pay more attention to what the new Chancellor says rather than the new housing minister.
If unemployment stays historically low, inflation doesn’t spiral further and we avoid the Bank of England’s prediction of a recession lasting more than a year, house prices should continue to rise modestly and transaction volumes will gently descend from the heights of the pandemic.
A lot will hinge on Liz Truss’s balancing act between populism and pragmatism. While she cannot have failed to notice the adverse reaction of financial markets to her proposals, she also has a “red wall” of voters to hold together before the next election in 2024.
We will undoubtedly learn more about how deep-rooted her populist rhetoric is in the coming days and weeks
So, will the new housing minister make any difference at all?
Some, but within limits.
Conservative governments like creating homeowners because they believe they are more likely to vote Tory.
We should therefore expect announcements that are designed to address the very real affordability problems people face, especially first-time buyers.
The question is what happens once the headlines fade.
Help to Buy, the Mortgage Market Review and various stamp duty changes have all left their mark, among other initiatives. But attempting to fundamentally alter a market that is driven by the laws of supply and demand rather than controlled by the state is ultimately futile.
A good start for the new government would be to acknowledge this fact and instead take a more targeted and low-key approach. How the headline writers and “red wall” voters would react to that is another matter.
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