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What Rishi Sunak means for the Property Sector.

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UK politics has been somewhat of a circus act over the last few months, accompanied by a growing sentiment of uncertainty that swept through the nation. All of this political mess comes at a time when households face serious economic hardship.

So, with our new Prime Minister Rishi Sunak, hopefully, some stability and progress can be achieved. But what policies and issues are at the top list when it comes to the housing market and supporting the British public?

Financial growth and stability.

The arrival of Rishi Sunak as Prime Minister has pleased the financial markets after Liz Truss’ economic policies sent them into turmoil and dropped the pound’s value. His decision to U-turn on several of Chancellor Jeremy Hunt’s policies restored faith in the financial markets. Currently, the pound sits at £1.16 against the US dollar.

He still has a large undertaking, as he plans to rebalance the books and help bring down borrowing costs for businesses and households to tackle the cost of living crisis.

The health of the housing market is directly linked to the economy. Mortgage rates are currently nearly 6%. The B of E hiked its base interest rate to 2.25%. Future base rate hikes will hike mortgage rates even higher, as the cost of borrowing becomes greater.

This has been a huge hit to the buying power of those looking to move or purchase a new property, especially when they’ve been used to mortgage rates below 2%.

Mortgage rates will fall.

Current mortgage rates for businesses are starting to fall but they remain well above the normal levels that we had at the beginning of the year. Interest and mortgage rates are out of the government’s hands, as central banks are in control of the base interest rate. We don’t know how much further central banks will hike interest rates to curb inflation.

There is the hope of future interest rate hikes to be coming to an end. During a speech at Imperial College Business School on Thursday 20th October. The Deputy Governor of Monetary Policy said, “Whether official interest rates have to rise by quite as much as current prices in financial markets remain to be seen.”

This is great news for savers after nearly a decade of low returns on savings. This means buying a home has become more expensive.

Home Ownership and House Building.

Both parties, conservative and labour, have created policies to increase home ownership. With the appointment of Michael Gove taking back his role of housing and levelling up minister. His commitment towards the 2019 manifesto hopes to boost jobs and investment across England which will boost the delivery of new houses.

The number of completed new homes increased by 6% compared with 2021’s figures, equating to 44,940 completed homes being built.

Building more homes is a contentious topic for local residents as an increasing population puts extra demand on local services. 

Comments from the new prime minister during the leadership election suggests he recognises the importance of building new houses to support a climbing population.

Rishi Sunak said he favours “reforms to increase density in our inner-cities, investing in regenerating brownfield land across the country. Pursuing developments that have community support.”

Reforms for the private rented sector.

Sunak’s cabinet plan tackling the private rented sector, with reforms planned to improve standards of accommodation and shifting the relations between landlords and renters.

The rental market is currently under strain and over stretched. A lack of new landlords  entering the market has been on a downward trend since 2016. Tax changes and increased government regulations have made would-be landlords think twice about their investments.

Despite the rental market’s lack of growth, demand for rented property has been increasing by a growing population, the rising costs of houses, and growing demand. According to Zoopla’s latest index, rent is up 12%, compounding the cost of living pressures.

The government’s plan to reform the rented sector needs to be met with care and balance as it can easily result in landlords being pushed out or opting out altogether due to a lack of freedom and excess regulations.

Overall, there are plenty of issues that the government needs to address when coming to housing. Rising house and rent prices, a diminishing supply of rental properties, and rising interest rates will all prove a challenge towards this cabinet.

We believe that they should focus on stimulating long-term growth and stability that provides a strong foundation for households and businesses. With the current economic challenges this country faces, this is a large undertaking. Once through it, an economy plan that focuses on growth, cheap borrowing costs, an environment can be created that fosters investment to further boost the housing sector.