Starmergeddon: Election Twists and Economic Trends

“I hope you realise that every day is a fresh start for you. Every sunrise is a new chapter in your life waiting to be written.” – Juansen Dizon

Thank you to everyone who attended the Property Business Workshop on Thursday 4th July in London. It was a fantastic event.

Now, let’s dive into a post-election analysis and look ahead to what H2 2024 and beyond might bring.

Election Post-Mortem: What’s Weird?

The election results contained some strange features:

• Starmer enters as one of the least popular new leaders ever, yet still far more popular than Sunak at his exit.
• Only 33.7% of the 59.9% voter turnout chose Labour, compared to 40% of the 67.3% who voted for Corbyn in 2019. This resulted in the smallest percentage for any majority government in British electoral history – and the majority is 172 (but effectively 181)
• The Reform Party, with 14.3% of votes, secured only 5 MPs, whilst the more electorally experienced Liberal Democrats with only 12.2% of the vote secured 72 MPs. This highlights the peculiarities of the “first past the post” system.

This election showcased the quirks of our electoral system where a majority didn’t vote for the winning party. Time will tell if this is a triumph for democracy or a flaw.

The Political Landscape

Starmer’s promise to be boring seems to be self-fulfilling. There were fears of radical appointments, but the surprises were limited. Notable appointments include Patrick Vallance and James Timpson, the latter being a positive addition.

We saw the unexpected defeat of Liz Truss, reminiscent of Michael Portillo’s 1997 loss, and other significant figures like Rees-Mogg and Penny Mordaunt losing their seats. Jeremy Hunt just held on, reflecting a fair result after his tenure as Chancellor.

Rachel Reeves steps into number 11 Downing Street, with the bond markets showing no reaction to the election, indicating the results were already priced in.

Economic Outlook

Despite the post-election excuses, Labour faces significant challenges. Historically, people are willing to pay more taxes for better public services, a factor in the Conservative downfall.

The tax burden is at a 70-year high, yet taxes on working individuals (income tax and national insurance) remain lower than they have been in over 15 years. The strongest support for tax rises is for NHS funding, making the reversal of national insurance policies a curious decision by Sunak.

Real-Time Market Data

June’s property market data shows a slight decrease to £348/ft (it spent most of the month at £350/ft), but still 5.1% ahead of December 2023. Listings are up by 7.5% compared to pre-pandemic levels, and net sales for the last week of June were 20.8% higher than the same week in 2023.

Nationwide and Halifax reported mixed figures for June, with Nationwide showing a +0.2% increase and Halifax a -0.2% decrease. Overall, the market appears stable, reflecting no significant impact from the election.

Key Economic Indicators

• PMI Figures: Manufacturing at 50.9 and services at 52.1 indicate slow but positive growth. The construction sector shows continued output growth, led by commercial projects.
• Money Supply: The past 12 months show control over the money supply, suggesting a stable outlook for inflation. However, consumer credit growth, particularly credit card borrowing, is a concern.

Mortgage and Housing Market

Mortgage debt grew by £1.2 billion in May, with net approvals steady around 60k. Remortgages remained stable around 30k, while consumer credit borrowing increased. The average mortgage draw rate was 4.79%, reflecting higher costs compared to past years. The average outstanding mortgage is at 3.61%

Looking Forward

Despite the challenges, there’s potential for the UK economy to grow, driven by consumption recovery. Government spending needs to be controlled, but there’s room for efficiency improvements. The property market shows signs of resilience, with stable prices and steady transaction volumes.

Conclusion

The election may bring changes, but the property market remains robust. Keep an eye on macroeconomic factors, interest rates, and government policies. Stay informed, adapt your strategies, and capitalise on opportunities.

Save the date for the next Property Business Workshop on Thursday 3rd October.

Keep calm, always read or listen to the Supplement, and carry on!

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