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The effects of the General Election on the Cardiff property market

Since this week's General Election was announced back in May, many people have asked us what effect we have seen it have on the sales market, and how we predict the coming weeks and months will go.

Some buyers are "frozen"

We've observed a reduction in the number of buyer enquiries since the election was announced, with some people we've spoken to holding out hope that one or both of the big two parties will announce something that will save them hundreds or thousands of pounds, like a reduction in Stamp Duty or interest rates.

The reality is that neither party have pledged reductions to Stamp Duty (Land Transaction Tax in Wales), and it's highly unlikely they will at this stage. Interest rates are the responsibility of the Bank of England, and whilst they will be watching the effects of the country's vote prior to their next meeting in August, experts say they don't see the outcome impacting when rates will be dropped. We've covered both topics in more detail further on.

Once the election results are out and everything becomes more certain, we fully expect buyer enquiries to return to normal levels within a small number of weeks. Indeed, we hope to see them rise further, with a predicted drop in interest rates imminent (see later).

The strength of the pound

Currency-wise, the market hasn't observed any major changes in the run-up to Thursday's vote. Additionally, there's no expectation of big changes once the results are announced, as both Labour and Conservative have exercised economic caution in their respective manifestos.

When will interest rates drop?

With the recent news of inflation dropping to its 2% target, many are wondering when – or indeed if – the Bank of England base interest rate will drop from the current 5.25% it's been at since August 2023. A reduction would certainly be of interest to buyers.

The Bank have said the timing of the election was "not relevant" to its decision to keep the current rate in June, and experts predict the outcome of the upcoming election is unlikely to influence a future decision.

Before committing to a drop, the Bank are keen to see inflation stay under control. They have a particular eye on services inflation, which is still running higher than forecasted at 5.7%.

A reduction is on the near-horizon, it would appear. The rate-setting committee voted 7-2 to hold rates last time out, but the result was not as cut and dried as it had been previously. Three of the voting members said it was a “finely balanced” decision.

Experts are predicting that when the committee next meets on 1st August, the rate will drop by 0.25%, to 5%. This will be welcomed news for buyers and those who soon need renew their mortgage.

First-time buyers vs homeowner movers

The market has seen more first-time buyers than 'homeowner movers' in recent years. We suspect that's because existing homeowners have become used to lower mortgage rates, so are reluctant to face the costs associated with selling up and buying elsewhere. In contrast, first-time buyers are all-too-aware of high interest rates and have become accustomed to them.

A reduction in interest rates should see these homeowner movers come out of their shells, whilst stimulating first-time buyers further.

Are new homes going to be built?

Both Labour and Conservative manifestos pledge to build similar numbers of much-needed new homes; 1.5 million and 1.6 million respectively. However, housing policies have been extremely unstable in recent years, not helped by 15 housing ministers in 12 years.

Labour have said first-time buyers will get first-access to new homes. However, they need to be able to afford them, so the location of these new homes is going to be important. If they're built in areas with good amenities, ample transport links and bustling job markets, they may be out of reach for first-time buyers, as properties in areas like this are typically priced highly.

A continuation of the mortgage guarantee scheme would be good news for first-time buyers, as would any introduction of lower deposit schemes.

Other pledges that may make a difference

If Labour press ahead with their intention to add VAT onto private school fees, it could drive up the value of homes in catchment areas of well-regarded state schools, as they may see increased demand from those who can no longer afford private education.

There are other proposed changes, such as to non-domicile statuses in the UK, capital gains tax and inheritance tax, but not enough is known about them at this stage to make a prediction. Changes to Stamp Duty thresholds have been mooted for England, but Wales has its own Land Transaction Tax, which is set by Welsh Government.

Get in touch

Are you currently looking to sell a property? A good estate agent will excel at adjusting their strategies to match any market changes, ensuring your property is marketed to the right buyers at the right time. By trusting a skilled estate agent with your sale, you can benefit from their expertise, no matter the external circumstances. If you’d like to get in touch for a chat about any concerns you have at the moment regarding the property market here in Cardiff, give our sales team a call on 02920 454555.

04 July 2024

The information contained within this article was correct at the date of publishing and is not guaranteed to remain correct in the present day.

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