What has been the effect of political uncertainty?

We know that across the mainstream market, political and economic uncertainty have held back market demand and supply being brought to the market. Within the prime markets in which Savills operates, there has been a strong build-up of applicant demand among those waiting for the fog of political uncertainty to clear. In addition there are a number of agreed deals that have been put on hold pending the outcome of the general election.

What does the General Election result mean for buyers and sellers?

Today’s election result should unlock some of these deals and mean prospective buyers are more committed, bringing a greater sense of urgency to the market.

However there is a possibility that it will also harden some sellers’ price expectations.

Does that mean a bounce in prices?

The election of a Conservative majority government is in line with the assumptions which we made when we prepared our house price forecasts back in November. 

These suggest only modest price growth in 2020 on the basis that, despite domestic political uncertainty receding, some economic uncertainty will remain until a trade deal is agreed with the EU; even if, as is widely expected, the UK leaves the EU by the end of January without a further extension of article 50.

This could mean a bounce in demand in the first part of 2020 proves difficult to sustain through the summer months and into autumn market.

Can we expect any changes in stamp duty under the new government?

There is a possibility that some buyers and sellers hold out for a stamp duty cut that was floated by Boris Johnson during his Conservative party leadership campaign over the summer. However this was noticeable by its absence in the Conservative Party manifesto. Instead, we saw proposals for a further 3 per cent stamp duty surcharge on buyers who are not resident in the UK.

If anything, we think this is likely to support demand from overseas buyers in the short term as they seek to buy before it is imposed.

And what of sterling?

Those overseas buyers are also likely to want to lock into the weakness of sterling. We’ve already seen sterling appreciate and this reduces the currency play, but we expect this will be outweighed by much greater political certainty.

Sterling is expected to strengthen progressively as political and economic uncertainty clears, with the biggest impact coming after trade deals are agreed with both the EU and other trading partners. That is likely to provide a limited window in which buyers can take the maximum benefit from the weakness of the pound, though it is likely to be the catalyst for a recovery in prices in central London over the next five years.

Further information

Contact Savills Research