Rishi Sunak, Jeremy Hunt, David Cameron, Rachel Reeves, Yvette Cooper, Anneliese Dodds. All current members of either the Cabinet or Shadow Cabinet. All, too, studied Philosophy, Politics and Economics at Oxford University. And it doesn’t stop there, Ed Miliband, David Miliband, Ed Balls, William Hague, Michael Heseltine and Liz Truss also studied the very same course at the same institution.

So what does this have to do with the property markets? Those working in the property sector are somewhat more likely to rely on life learnings in the three areas. But philosophy, politics and economics all have a bearing on the world in which they operate.

Certainly, the experience of Brexit, the lockdown-led race for space and, more latterly, the rapid spike in interest rates, has provided a salutary reminder that the political landscape, the way we think about the world around us and the economic environment are all crucial drivers of the housing market.

EARLY INDICATORS IN AN ELECTION YEAR

What does that mean for the prime housing markets in 2024, a general election year during which inflation is expected to fall substantially, paving the way for interest rate cuts?

Our latest prime house price index results suggest that, as greater stability has returned to the cost of mortgage debt, so greater security has returned to the value of homes at the top end of the housing market.

After six successive quarterly falls, the price of prime homes in central London levelled out in the first quarter of the year, albeit the only discernible increase in values was in the market between £3m and £5m.

Meanwhile, having fallen by -2.7% between the calamitous mini budget in the Autumn of 2022 and the end of last year, the value of prime homes elsewhere across London rose by 0.8% in the first three months of 2024 as domestic upsizers returned to the market.

Beyond London prices had fallen more significantly during the back end of 2022 and 2023 as buyers philosophised less about the joys of country living, focused more on the practicalities of commuting and put a lid on how much debt they were prepared to take on. And so an average -6.0% fall in prime regional property prices essentially undid around 40% of the price appreciation seen in the wake of the pandemic. But here, too, prices bottomed out in the first three months of the year as we approached the typically busier spring market.

And although there was little continued downward pressure on prices of larger properties in more rural areas, the rate of price adjustments for the Manor Houses and Rectories (that take the top spots in our list of most valuable house names) slowed significantly.

WHAT STRONG AND STABLE WAS MEANT TO LOOK LIKE

Certainly, from an economic perspective the outlook has improved. With inflation once more heading back towards the Bank of England target of 2.0% (coming down to 3.2% in the year to the end of March) the first rate cut is rapidly coming into view. At the same time, recessionary risks continue easing. 

Against that backdrop, our March buyer and seller survey (further detail of which can be found on the buyer sentiment page) showed a further pick up in prospective buyers’ commitment to move. It also provided early signs that buyers’ budgets are beginning to edge upwards, though that is finely balanced between those in their 30s and 40s, who have benefitted from more security over future mortgage costs, and older downsizers aged 60 and above who have had to rein in the price expectations of the home they are selling.

PUTTING IT TO THE POLLS

From a political standpoint, the same survey showed a surprising degree of ambivalence towards the prospect of a general election, with 79% of respondents saying it had no impact whatsoever on their commitment to move over the next 12 months.

That reflects the short odds on a change in government. At the end of March, YouGov gave Labour a 25 point lead in the polls, while Oddschecker put a Labour majority at 1 to 6 on. 

That, in turn, suggests political change is already largely priced in to the market. And so, while prime property buyers may well have to contend with higher levels of underlying taxation, VAT on private school fees and targeted measures for, say, overseas buyers, there is a sense that they know what they are in for. Importantly, talk of more aggressive wealth taxes (think back to the ill-fated mansion tax proposals of the early 2010s) haven’t surfaced.

NON-DOMS

Less expected was the pre-emptive move by the incumbent government to do away with the nondoms tax regime, especially having already introduced measures to target those long-term resident in the UK.

This is of most relevance to the markets of central London and the private estates of the Home Counties where international, high and ultra-high net worth demand is most prevalent.

In these markets, the initial reaction from some in the midst of a potential purchase is likely to be followed by a period of more sober reflection, as those affected weigh up their revised tax position against other more practical consequences of changing their life plans.

In reality, such deliberations were inevitable at some point, given that non-dom taxation was firmly in the sights of the opposition. Essentially then, they have been brought forward and will take place with the benefit of a number of transitionary arrangements and concessions that might not otherwise have been made available.

No doubt it will mean these parts of the prime housing market will remain price sensitive for a little longer. Politics will mean they are slower than the more domestic, prime housing markets to feel the benefit of an improving economic environment. Philosophically speaking that is.

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