Boom looming? Labour victory and rate cut to boost market

Estate agents are more optimistic about the sales market following the general election although it remains ‘subdued’, RICS has reported.

Its monthly barometer of agent member views reveals that many believe mortgage rates will fall now that the political to-and-fro is over, and that this will see activity pick up over the next three months.

A net balance (see below) of +20 of respondents anticipate a recovery in residential sales up from +10 in June and the highest level of sales expectations since January 2022.

RICS says this shows many of its agent members have confidence in the newly elected Labour government after its campaign promise to boost the housing market, aiming to deliver 1.5 million homes over the next five years, a figure not hit since the 1960s.

The report notes that this will “not be an easy task” and that affordability remains a major constraint on the sales market, with a net balance of +54 believing prices will continue to climb.

“Although activity across the housing market remained subdued last month, forward looking aspects did improve slightly.

“If the Bank of England does decide that the current inflation backdrop is benign enough to start loosening monetary policy next month, this may prompt a further softening in lending rates,” says Tarrant Parsons, RICS’ Senior Economist.

“In addition, the recent election delivered a clear outcome, with housing pushed up the political agenda.”

The RICS monthly Residential Market Survey also reports a net balance of +28 of respondents reporting a pick-up in tenant demand during June but new landlord instructions have weakened, which is likely to push up rents even further.

Reaction

Jeremy Leaf, north London estate agent and a former RICS residential chairman

“The election had limited impact on our buyers and sellers, not just because the outcome had been largely factored in but the pace and level of mortgage rate reductions was much more relevant.

“Over the past month and particularly since the result, we have seen a rebound in confidence and activity.

“However, we are not getting carried away as the increased choice and continuing economic concerns will keep the higher price aspirations of homeowners in check.”

What is ‘net balance’?

A positive net balance implies that more respondents are seeing increases than decreases (in the underlying variable) while a negative net balance implies that more respondents are seeing decreases than increases and a zero net balance implies an equal number of respondents are seeing increases and decreases. The figures range from -100 to +100.