The waiting is finally over. After months of predictions and speculation, we now know that the country will be led by a Conservative government. So where does this leave the property market? Generally speaking, house prices increase more under a Tory government. In fact, according to the Nationwide house price index, since 1970, they have risen at an average of 19 percent per year compared to 10 percent a year under Labour administrations.
It is widely expected that this trend will continue. The threat of a ‘Mansion Tax’ has now been quashed and this will prevent any potential rigidity that there would been in pricing at around the £2 million mark. Owners of properties in this price bracket now have a degree of flexibility around the asking price they can set and this will allow the market to dictate what each property is actually worth. The Mansion Tax would have devalued those homes worth more than £2 million and that could well have had ramifications for prices further down the market.
Buyer confidence will certainly return. I have been dealing with a few situations where prior to the election we had received offers that weren’t acceptable to our clients. The potential buyers came back to us and said that they would consider increasing their offer once they knew outcome of the election. Within hours of the results, they increased their offers. We also had new instructions and only a day later, one of those new properties received an asking price offer.
Another real problem over the past few months has been the lack of supply, in particular between £1.5 and £3 million. There have been very few family homes for buyers to choose from and that should now change for obvious reasons. However, demand will increase too and it will be interesting to see where the market goes from here.
Are we going to see another housing bubble? It is a distinct possibility, particularly in the short term as I feel that the election result provides a real shot in the arm for the market. In the long term, however, it is imperative that the market reaches more of an equilibrium. According to Nationwide, house prices are now 9 percent below their peak, suggesting positive price growth for at least five years. In order to create stability over the longer term and to encourage a more gradual rise in house prices, it is crucial that more land is released for house building. The Conservatives plan to deliver 200,000 new homes, which they are prioritising for first time buyers. This will certainly come as welcome news to the house building industry and will go some way towards aiding a more sustainable property market in the long run.
There is certainly an element that the market will still need to find its natural level, but the outlook is certainly positive. An increased level of supply, with the potential for a measured house price growth over the coming years makes this a really good time for buyers and sellers alike.