The UK housing market faces a period of political uncertainty following Prime Minister Andy Burnham’s recent speech outlining housing policy proposals, according to analysis from Knight Frank.
Burnham’s address included proposals for potential capital gains tax reforms, replacing stamp duty and council tax with a land value tax, a large-scale social housebuilding programme, and greater devolved tax-raising powers. However, no detailed policy proposals have been published, leaving the property sector to assess which measures may be implemented.
Prime London market pressures
The prime central London (PCL) market recorded an annual price decline of 3.6% in June for the second consecutive month. Transaction volumes in PCL fell 14% in the year to June compared to the previous 12 months, according to Knight Frank data, though the number of offers made declined by only 4% over the same period.
Tom Bill, head of UK residential research at Knight Frank, said: “The number of transactions in PCL in the year to June was 14% lower than the previous 12 months. That said, the number of offers made was only 4% lower over the same period.”
Prime outer London showed greater resilience, with average prices falling 0.4% in the year to June, returning to June 2022 levels. Transactions declined 7% year-on-year, while offers made increased by 5%.
The uncertainty follows Labour’s previous commitment to deliver 1.5 million homes, a target that has not been achieved. The government also faces fiscal constraints, highlighted by a reported £4.7 billion shortfall in the Defence Investment Plan.
Broader market impact
The wider UK market showed signs of pressure last week, with mortgage approvals falling 14.8% to 56,205, marking the tenth largest monthly decline since records began in 1993. HMRC data showed transaction numbers fell 2% between April and May, indicating the absence of a seasonal spring increase.
Bill attributed the recent declines primarily to the Middle East conflict and associated mortgage rate rises, though noted that energy prices are stabilising as both sides move towards a ceasefire. The government’s broader housing policy framework continues to develop amid these market pressures.
Foreign Investors for Britain responded to Burnham’s speech, stating: “The people who create businesses, back innovation, employ staff and support philanthropy are not an enemy class. If Britain sends the message that success will simply be taxed, vilified and raided, many of those people will not stay to fund the next phase of national renewal.”
Former Treasury special advisor James Nation warned that questions of legitimacy around the new prime minister would increase the further he drifts from the 2024 Labour manifesto. The property sector now awaits the autumn Budget for clarity on policy direction, while lending activity in London continues amid the uncertain environment.
