Conservative party conference 2022: how will UK housing market react?

Last week’s Tory party conference began on 3rd October with a U-turn on tax policy and ended with a rousing speech from the Prime Minister, here we take a look back at the events from the conference. 

With barely one month on the calendar as the new Prime Minister, all eyes and ears would be on Liz Truss as the conference wound up on 5th October and she delivered her address to her MPs.

Before we get there, let’s rewind to 23rd September when the ‘mini-budget’ was announced.

The party has been accused of damaging the pound and economy more widely after a market-spooking mini-budget that in turn led to the tanking of the pound against the US dollar.

Shortly after, with a expected rise in rates from the Bank of England, lenders soon hiked up the cost of borrowing, squeezing mortgage affordability further.

Mini-budget headlines

So what are the headline policies? Corporate tax cuts, stamp duty tax cuts, investment zones and income tax cuts all gathered attention from the media.

The raft of tax cuts and other measures, whilst aimed at putting money back in the pockets of people, are also designed to boost business and growth.

For the housing market, the cut in stamp duty was welcomed, especially by first time buyers, but was not something to get carried away with.

Market budget reaction

Optimism regarding the budget was short-lived as markets, spooked by unfunded tax cuts, reacted to the new fiscal plan.

The pound was shortly tanking against the dollar, interest rates predicted to rise and the mortgage affordability brought into question.

The Bank of England launched a limited gilt-buying programme to prevent a “self-reinforcing spiral” as pressure was put on pension funds.

More recently lenders withdrew thousands of products from the market and average mortgage interest rates rose above 6%, the highest since 2008.

Tax policy scrapped

The conference started with a climb down on tax policy, specifically the scrapping of the 45p tax rate for top earners. This was becoming “a distraction” from other policies and overall direction in which the new government is moving.

An eagerly-anticipated speech from chancellor of the exchequer, Kwasi Kwarteng, was described as somewhat underwhelming by commentators in both its content and delivery.

He said that the mini-budget announcement had caused “some turbulence.” And highlighted the need for economic growth with an “iron clad commitment to fiscal discipline.”

Support for people was also brought to the fore with the reminder that household energy bills, on average, will now be roughly £2,500 per year. 

Liz Truss staying the course

‘Growing the pie’ may be a term you weren’t, but now are, familiar with. Liz Truss has made it clear that her government is all about growth, rather than redistribution.

The prime minister's speech at the conference cemented her commitment to the idea that growth is the only answer to the country’s current financial situation and has pledged to “Get Britain moving.”

The new PM enthusiastically proclaimed the three priorities for the economy “Growth, growth, growth.” This will be achieved through cutting tax and cutting regulation.

Despite a brief interruption from Greanpeace protestors asking the question: “Who voted for this?” the speech was largely well received by the party members in attendance.

UK housing market impact

One week ago today we saw the beginning of a tumultuous conference party begin, overshadowed by a mini-budget announcement that caused waves in the economy and led to Tory MPs openly speaking out against specific policies.

As things begin to settle, the outlook for the outlook UK housing market certainly looks different to how it did only a few months ago.

The latest forecast from Knight Frank predicts a 5% fall in house prices next year and the same in 2024, a total decline of 10%

Time will tell whether this new approach to growing the UK economy will work, and what further impact, if any, it could have to the UK housing market.

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