Ready for Rishi? Sector hopes for market clarity under PM Sunak

Property professionals are hoping for calmer markets after Rishi Sunak was confirmed as the new UK Prime Minister yesterday.

Sunak won the Tory leadership race after rival Penny Mordaunt pulled out at the last minute amid reports that she was failing to garner enough support from MPs.

It comes as former Prime Minister Liz Truss stepped down as PM after just 45 days following the negative market response to the mini-Budget devised by her and former chancellor Kwasi Kwarteng.

Lawrence Bowles, director of research at Savills, said: “The uncertainty of the last few months has had a material impact on gilt rates: the rate at which the UK government can borrow. In turn, this impacts the cost of borrowing for the rest of us. It affects mortgage rates for home buyers, development debt costs for housebuilders, and refinancing costs for property investors.

“Anything that helps bring certainty and confidence back to the market is likely to reduce borrowing costs. That, in turn, will reduce affordability pressure for households securing mortgage finance, for housebuilders starting on new sites, and for investors buying and operating homes for rent. 

“In that sense, the trajectory of gilt rates over the past few days is reassuring.”

Bowles highlighted that while government borrowing costs remain far higher than they were in the summer, they have declined substantially since the highs immediately following the mini-Budget. 

He added: ”With more breathing room, lenders should feel the confidence to put more products back out to the market.

“We can still expect to see affordability pressure grow in the coming months as mortgage costs rise. We can take some comfort, at least, that this pressure will peak at lower levels than we might have feared previously.”
 

Grainne Gilmore, director of research and insight at Cluttons said there are still economic headwinds ahead but suggested a clear and sustained message on how policymakers are going to tackle these challenges should help calm the money markets and improve sentiment. 

She added: “This could have a material knock-on impact on the pricing of loans as a reduction in political upheaval allows gilt rates to fall and interest rate expectations to be revised down.

“The next hurdle is the Budget next Monday, but if there are no major surprises, there will then be an opportunity for politicians to get back to business as usual, something which the markets and businesses will welcome.”

She added: “Once the government is stabilised it should prioritise at providing clarity around housing policies, including planning reforms, to provide a clear steer for homeowners and businesses across the industry.”

The National Association of Property Buyers (NAPB) even suggested Sunak's appointment could help avert a house price crash.

NAPB spokesman Jonathan Rolande said: “As chancellor, Sunak demonstrated he could navigate the economy through what were some of the biggest challenges this country has ever faced. 

“So there will be confidence and a sense of assurance that he has been picked to lead the country.” 

"He can’t wave a magic wand and sort out all the problems which exist in the economy, and he certainly can’t ensure house prices won’t fall.

“The likelihood is they will fall in many regions over the months ahead. But I believe the economic markets will respond favourably to his appointment and the risk of a dramatic fall in house prices is now far less likely as a result. 

“Of the three candidates, Sunak feels like the unity choice. Had Boris Johnson or Penny Mourdant won the race then it was likely to have created more disunity and more disruption. 

“Right now we need stability in our leadership as this will have a knock on impact across other areas of the economy - including the property market."

Sunak will now need to form his own Cabinet, which could mean yet another Housing Secretary and Housing Minister.

Current Housing Secretary Simon Clarke was previously a supporter of Truss before backing Boris Johnson to return as PM last week.

He quickly changed his mind yesterday and backed Sunak once Johnson pulled out of the race.

Timothy Douglas, head of policy and campaigns for agency trade body Propertymark, added: “With a new Prime Minister, there will likely be changes in the Department for Levelling Up, Housing and Communities. 

“The industry is weighted with frustration at the inconsistency of leadership in housing. Housing is a huge conversation right now and needs to be prioritised by the Prime Minister, with a cross departmental, long term strategy.”