House prices fell by 0.2 per cent in June as experts warn that Labour’s long-term plan for the property market won’t have an immediate impact.
A new stable government usually improves property activity, which might push prices up, and Labour’s freedom to buy policy, which will have the government act as a guarantor for people unable to save big deposits, could help more on to ladder.
But seperately, it wants to build 1.5 million new houses, which would generally have a slight suppressing effect on prices.
It comes as the average house now costs £288,455, down £476 in a month, according to the latest Halifax House Price Index.
Although this is up 1.6 per cent in the past year, the market has still been suffering from a lack of demand amid a period of high mortgage rates and house prices.
Amanda Bryden, head of mortgages at Halifax, said: “This continued stability in house prices – rising by just 0.4 per cent so far this year – reflects a market that remains subdued, though overall activity has been recovering. For now it’s the shortage of available properties, rather than demand from buyers, that continues to underpin higher prices.”
Experts warn that although Labour will be looking closely at how to make improvements in the property sector, it won’t happen immediately.
Sarah Coles, head of personal finance at Hargreaves Lansdown, said: “The property market is likely to be near the top of the government’s agenda in the coming weeks.
“However, it isn’t going to make much of a difference in the short-term. House prices and sales have been tepid for most of 2024 so far, and they don’t look likely to warm up any time soon.”
Others warn that although the new government has promised to build new homes, this could take time.
Karen Noye, mortgage expert at Quilter, said: “Time will tell whether a new Labour government will help spur buyers back to the market. Such ambitious housing targets have historically been challenging to meet, and this is likely to be no different.”
Alice Haine, personal finance analyst at Bestinvest, added: “These proposals can take time, however, though some buyers may be happy to wait for the election dust to settle before they plough into the market. For now, the focus will remain on interest rates and if they really do start heading downwards before the summer is out. If that happens, then housing market activity, and in turn prices, may benefit as the year goes on.”
Earlier this year, borrowers getting fixed mortgages could secure rates of below 4 per cent, providing they had large deposits or equity in their home, because expectations were that a cut to interest rates would come in the first half of the year.
But no cut came, and rates still stand at 5.25 per cent with mortgage rates also increasing. However, in recent weeks, major lenders including HSBC, Barclays and Santander have started cutting fixed rates.
If the Bank of England reduces the base rate at its next meeting in August, as some experts expect, mortgage rates are expected to reduce further which could inject a boost into the housing market.
Andrew Montlake, managing director at broker Coreco, said: “Mortgage affordability remains a challenge but the steady flow of rate cuts from lenders this week alone is seeing things improve slightly on that front.
“The decisive win for the Labour Party overnight, and the fact that the election is now over, could see demand for property pick up.”