Burnham’s victory ushers in fresh uncertainty

Greater Manchester mayor Andy Burnham won a decisive victory in the Makerfield by-election overnight, taking 55% of the vote and initiating yet another period of political uncertainty that will hang over investment decisions.

Should Prime Minister Kier Starmer refuse to step down – as he has indicated so far – an official contest triggered in the next week or two would last through the summer, with a new leader likely crowned at the Labour conference in September, according to the FT.

Housing and affordability are among the key issues for Labour voters, so we can expect a steady stream of policy suggestions. Burnham has sketched out a few priorities; he favours a land value tax over council tax, or at the very least wants a shake-up of the property tax system so that homeowners in London and the southeast pay more than they currently do. He wants to invest £40bn in a new generation of council houses, opposes right to buy and has previously called on the government to impose rent controls. There’s more on his policy platform in the Times this morning.

Borrowing costs

Burnham has pledged to stick to the established fiscal rules, which reduces the likelihood that a raft of unfunded pledges leads to a spike in borrowing costs. On that front, things are moving in the right direction. The US-Iran deal, plus weakening output, lower-than-expected inflation and soft pay growth have enabled gilt yields to ease back from the post financial crisis peak seen last month.

The Bank of England yesterday voted by a 7–2 majority to hold the base rate at 3.75%. The consensus view is that the energy shock will ripple through the economy without triggering the much-feared wage-price spiral. Megan Greene and Catherine Mann, the two dissenters, favoured a proactive hike to help anchor inflation expectations.

Investors have pared back expectations for further tightening, with markets now pricing in one rate hike this year rather than two. As BoE policymaker Alan Taylor pointed out, if the conflict resolution holds, and risks diminish, it’s easy to see the case for lower rates in 2027. As per Wednesday’s note, UK mortgage lenders are emerging from another sluggish spring, so they wasted no time in cutting rates. Nationwide was the first major lender to cut rates on Tuesday. Several competitors followed, including Barclays and Santander. 

Quicker sales

The government this morning published a set of reforms to the way people buy and sell homes following a consultation that began last year. It takes about 120 days to complete a deal once an offer is accepted, which is about 60% longer than it was in 2007. About one in three transactions fall through.
 
By the end of the parliament, sellers and estate agents will have to compile sales packs that include all relevant searches alongside a detailed report on the condition of the property. Once sellers accept an offer, binding conditional contracts will be introduced to prevent gazumping. The government plans to consult on introducing mandatory qualifications for estate and letting agents through 2027 and 2028.
 
You can read our response to the initial consultation via Knight Frank chief operating officer Andrew Groocock here. Our concern is that the time delay sits between the offer acceptance and exchange period, and the government’s proposals shift this delay to the period before any property can be launched to market. The government has other, more powerful levers that can be used to increase mobility – most notably cutting stamp duty. 

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