Normally, in the run-up to a general election, property buyers and sellers sit idly by. The market remains stagnant and real estate agents could well take a month or two off. But with just over five weeks left, these early elections have taken everyone by surprise.
There is little chance of a change of government, so a much bigger question looms over anyone willing to take action: should they wait until September or press ahead?
One reason to strike while the iron is hot (or rather, the garden is looking prettier) is that the spring market went into action later this year and there is only half a school semester left before everyone goes on vacation, when they won. You won’t be looking for a new home.
A cottage in Latimer, Buckinghamshire, with a lush spring garden which could make it more attractive to sell
If your property is already for sale, there is little reason to take it off the market, says Edward Church of agent Strutt & Parker. “It’s easy to get caught up in the theatrics of politics, but the election will be over in the blink of an eye and you’ll be in a good position to catch any uptick in activity that follows the election.”
Dominic Agace, chief executive of Winkworth, also advises owners to make the most of the day. “Take advantage of the current momentum before the August holidays.” he says, citing Winkworth’s office in Highcliffe in Dorset, which has just sold a house worth £1.675 million to first-lookers on the first day it was put on the market.
The snap election will not produce a two-month pause, like in 2017 or 2019, says Roarie Scarisbrick of buying agent Property Vision. “The pre-election real estate market feels different this time because the outcome appears to be more predictable and the consequences of fiscal threats have been built into the market.”
The pace and scale of interest rate cuts will have a more significant impact on the market than the timing or outcome of the general election, says Lucian Cook, head of residential research at Savills. “With the prospect of lower borrowing costs as the year progresses, there is further opportunity for buyer demand to gain momentum through the autumn, with most of the uncertainty behind us.”
Markets tend to become active after elections, so should you try to avoid the rally?
If the right property comes along, buy it now, suggests Jamie Freeman of Haringtons UK, a purchasing advisor. “Inevitably, the sheep in all of us will mean that the number of buyers will only increase when the new government provides more clarity in the autumn.”
However, there has already been an increase in the number of properties for sale, according to Matt Thompson, head of sales at Chestertons. ‘Don’t miss it waiting. There has been an increase in house hunters eager to take advantage of the increased number of properties.
Added to this is a flood of private school parents who need to move near a state school. A report by wealth manager Saltus last week found that more than a quarter of parents would take their children out of private school and move them to a local state school if Labor imposes the VAT tax.
According to Zoopla, the home sales pipeline is “now rebuilding after a period of lower sales”. Agreed sales are 12 percent higher year-over-year and mortgages in February were 32 percent higher than a year ago.
However, in London demand continues to outstrip supply. The election won’t alter the lack of supply, says buying agent Henry Pryor, who advises buying clients to “hold back.”
‘This summer we will not have built many more homes. We will still have the cladding crisis, the tenancy crisis and we will be waiting for a tenant reform bill, and whoever wins, house prices and rents will be slightly higher come Christmas and just as unaffordable for the majority.’
In prime London, international buyers are pushing ahead in the face of new uncertainties, says Shaun Drummond of Harrods Estates. “These include Labour’s ever-changing property market policies and stance on stamp duty for foreign buyers.”
Encouraging inflation figures are now a driving factor, says Liam Monaghan, MD of LCP/PrivateOffice, a purchasing agent. “Some are leaving an overinflated rental market or want to take advantage of favorable exchange rates.”
Even the US election is a reason to push ahead, says Jimmy Waight, head of sales at John D Wood & Co: ‘Waiting until September introduces other uncertainties, including the US election. The stark contrast between Donald Trump and Joe Biden could have ramifications for the global economy, a key consideration for shoppers in blue-chip London.
For those thinking about buying or selling their vacation rental, the key issue is taxes.
“Motivated sellers want to exit while the top rate of Capital Gains Tax (CGT) is lower (since the recent Budget),” says Katie Warren of Fixer Management Services, which acquires holiday lets for clients. Capital gains tax is a tax on profits when an asset that has increased in value is sold. You are taxed on the amount you have earned, so if you bought a property for £250,000 and then sold it for £300,000, you will have made a profit of £50,000.
“If a new government proceeds to remove the tax relief for furnished holiday lettings (FHL), this would also be the last year in which those benefits would be obtained,” he adds.
The government’s plans involve abolishing the beneficial tax treatment for FHLs from April 6, 2025.
Homeowners will lose tax benefits on mortgage interest, capital gains tax, allowable expenses and pension contributions.
Currently, mortgage interest on FHLs is deducted from rental income. From April 2025, the relief will be provided as a 20 per cent tax credit, so for higher and additional rate taxpayers it will mean a reduction in tax relief of 40 per cent and 45 per cent respectively. From April 2025, a residential property CGT tax rate of 24 per cent will apply to FHLs. From April 2025, you will only be able to claim a deduction for the replacement cost of household goods against your rentals and FHL earnings will no longer be considered relevant earnings.
Josephine Ashby, of John Bray Estates in Cornwall, adds: ‘Buyers can use this period to negotiate hard. There are some once-in-a-generation properties on the market.’
Polperro in South Cornwall which is a popular location for holiday lets
Then there’s council tax on second homes which is set to double next year, adds Clare Coode of Stacks Property Search. “There are not as many buyers as usual, and here in Cornwall there is a buyer’s market.”
However, Joanna Cocking, head of private office (field) at Hamptons, urges caution for country home sellers whose homes need some TLC. ‘Properties that are “turnkey” or “move-in ready” are getting the most interest and the best prices. Sellers whose properties could benefit from improvements should take the time to improve their home’s curb appeal.’
For first-time buyers, it may not be wise to take a break either, says Ben Thompson, deputy chief executive of Mortgage Advice Bureau. ‘They need to make their first purchase as soon as possible so they can stop paying their landlord’s mortgage and avoid rent increases of around 10 per cent (like last year). Buyers who delay may also be hurt if house prices rise again while they are renting.’
Any future cuts to the bank base rate are largely already built into current mortgage rates, he says. “Even if this figure declines a little in the coming months, in today’s volatile world there are no guarantees: inflation could remain persistent and mortgage rates may not go down much.”
Those who take a wait-and-see approach could end up paying more in stamp duty, or if stamp duty is reduced and years of pent-up demand are released, they will end up paying higher property prices, says Andrew Montlake, MD. from Coreco mortgage brokers. ‘Buy when it’s right for you. Waiting for a new government could cost them as much as saving.’
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