Uncertainty over Andy Burnham’s economic plans is creating headwinds for the UK housing market just as it starts to emerge from the shocks caused by the war in the Middle East, according to a survey of estate agents.
The Royal Institution of Chartered Surveyors said agents reporting a drop in buyer enquiries continued to significantly outnumber those seeing an increase in June, though to a lesser extent than the previous month. However, politics at home was widely cited as a growing threat, as speculation mounts over what a Burnham premiership means for property owners.
Reports that the former Greater Manchester mayor is considering sweeping changes to property taxation are leading many prospective buyers to delay decisions until there is greater clarity. With no challengers, Burnham is on course to succeed outgoing Prime Minister Keir Starmer this month.
“Any nascent improvement remains fragile and is now being tested by renewed political uncertainty on the domestic front,” said Tarrant Parsons, head of market research and analysis at RICS. “Uncertainty around the outlook for inflation and borrowing costs continues to weigh on sentiment, even if the recent decline in oil prices is a welcome development.”
RICS’ survey was conducted June 1 to July 6, a period that captured the lead-up to Starmer’s resignation, the Bank of England’s decision to hold interest rates and a tentative ceasefire between the US and Iran.
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That truce is now under threat, however, after the US launched strikes on Iran following attacks on ships in the Strait of Hormuz that it blamed on the Islamic Republic. Oil prices climbed for a second day Wednesday and traders added to wagers that the Bank of England will raise rates to curb inflation.
More agents saw values fall than rise in recent months, RICS said. The south of England had the most negative price trends, while Northern Ireland and Scotland saw an uptick. Looking ahead, they expect sales and prices to remain under pressure in the short term.
The survey chimes with recent data from UK mortgage lenders. Nationwide Building Society said house prices failed to grow for a second month in June, with mortgage rates remaining elevated despite easing in recent weeks. Lloyds said values edged up just 0.2% after falling 0.2% in May.
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Concerns about the political situation were voiced by agents from York in northern England and Birmingham in the Midlands to the capital London, which would be disproportionately affected were Burnham to extend a levy targetting Britain’s most expensive homes.
“The prevailing political uncertainty, compounded by speculation about what new or increased taxes the incoming PM will impose, is stifling activity in all but essential transactions. In the Prime Central London market, one is searching for some positive news,” William Delaney, a property consultant at Coopers of London, said in comments accompanying the RICS report.
“Until there is greater clarity over both the political backdrop and the path of interest rates, housing market activity is likely to remain relatively subdued in the near term,” Parsons said.
Chart: Bloomberg
