What does Liz Truss mean for London’s prime property market?
There are also indirect repercussions for the property market in major London postcodes from what the government says and does in the coming weeks.
The first point to emphasize is that of tone rather than substance. Truss ruled out a windfall tax on energy companies in his first Questions to the Prime Minister. Encouraging foreign investment is clearly a key part of the government’s economic policy and proposed corporate tax hikes will also be scrapped.
It sends a seemingly benign message to the rest of the world about the merits of investing in London, including its property market.
A support program designed to help households and businesses survive soaring energy costs will also have an impact. This will help integrate real estate markets more directly by keeping energy bills under control, but it will also trickle down to home buying chains by bundling existing transactions and improving accessibility.
The risk facing the country, however, is that monetary and fiscal policy will pull in different directions – assuming Andrew Bailey stays in place.
The Conservative government is already effectively in pre-election mode and if tax giveaways fuel inflation, the Bank of England could be forced to raise rates more quickly, hurting demand by making mortgages more expensive.
On the other hand, if the financial markets are unconvinced by the Truss approach and worry about the UK’s growing debt, there will be downward pressure on the pound, which will have a negative effect. shock absorber on the prime market in London.
As the pound hits fresh lows against the dollar and pegged currencies, discounts are widening and attracting buyers – a theme we’ll explore in more detail on Monday.
The final piece of the puzzle is rising rates. As they continue to rise this will dampen demand, although to a lesser extent in major London postcodes due to higher levels of home equity and wealth.
In summary, a short-term boost seems likely from a government already in pre-election giveaway mode. However, there are longer-term economic risks associated with an episode of short-term fiscal largesse.
Average prices in central London were up 2.8% on the year to August, unchanged from the July figure. In the outskirts of London, a rise of 5.2% also matched the previous month.