Sunak in No 10 - Sigh of relief from agents and industry

There seems to be an industry-wide sigh of relief that Rishi Sunak has become Prime Minister.

His coronation marks the end of a lengthy period of political instability with the disintegrating government of Boris Johnson over he first half of this year, the argumentative Tory leadership race over the summer and the rapid failure of the Truss administration.

“The appointment of a new prime minister is a much needed step away from the political instability of the last few months. There are still economic headwinds ahead, but a clear and sustained message on how policymakers are going to tackle these challenges should help calm the money markets and improve sentiment. 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” explains Grainne Gilmore, director of research and insight at Cluttons.

“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 continues: “More political certainty should mean that money market rates, which determine the pricing of fixed-rate mortgages, begin to recede, which could bring down the cost of fixed-rate deals. However, it is very likely that the Bank of England will increase the base rate next month, which will result in higher payments for those on variable rate home loans.

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

Lawrence Bowles, director of research at Savills, is also delighted the instability appears to be at an end

“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” he says.

“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 last few days is reassuring. While government borrowing costs remain far higher than they were in the summer, they have declined substantially since the highs immediately following the so-called “mini” Budget. And 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.”

Meanwhile Timothy Douglas, the head of policy and campaigns for the agents' trade body Propertymark, comments: “With a new Prime Minister, there will likely be changes in the Department of 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.”

Surprisingly little is known about the housing policies backed by Rishi Sunak.

Over the summer he set out his broad housing policies in the lengthy series of hustings and media interviews held with the then-Tory leadership rival Liz Truss.

Throughout the Boris Johnson-led government of 2019 to mid-2022 Sunak fell in line over the Renters Reform Bill and Fairer Private Rented Sector White Paper; he made few comments explicitly about landlords or tenants, save to support the general thrust of recent reforms and also backing the successive eviction bans during the Covid period. 

It is expected that he will continue with the long-standing Conservative commitment to scrap Section 21 powers.

In August Sunak said he wanted today’s renters, along with young adults obliged to live at home with their parents, to become capitalists - and that meant getting their hands on capital in the form of home ownership.

He told Sky News in one interview: “We are the standard bearers for capitalism. But we can't expect future generations to share our belief in capitalism if they can't get their hands on capital. That's why I'll do whatever it takes to build affordable, plentiful housing, building the next generation of Conservative voters.”

More broadly on housing, the former Chancellor said he wanted developers to finish a project before they are granted new planning permission for other plots in the same local area, while local authorities having greater compulsory purchase powers to buy undeveloped land at a discount if it has not been built on within an agreed time frame.

To avoid existing communities having too many new homes without appropriate local facilities, he also pledged a new 'infrastructure first guarantee', which aims to ensure all new homes are supported by enough local doctors, schools and roads.

Sunak’s most explicit expression of housing policies was set out in a written response to questions from the Housing Today publication. 

In that response he said he was against the previous Tory manifesto commitment to build 300,000 homes a year in England, because he now rejected “arbitrary top-down numbers”.

Instead his team said: “Rishi does not believe in arbitrary, top down numbers. What matters is helping councils to get local plans in place more quickly to deliver beautiful homes, which communities can support.” 

The statement added Sunak wanted to introduce reforms to tackle landbanking, remove barriers for small builders and deliver more homes through modern methods of construction. He also plans to implement a “balanced approach” to planning fees, which his team said will provide funding certainly for planning departments but also not “place disproportionate burdens on smaller developers”.