Rishi Sunak took the helm of the Conservative Party today following a brief race that saw him emerge as the only eligible competitor. Tories have hailed his victory as a chance for the party to turn over a new leaf and have a shot at “unity” following a chaotic few weeks under Liz Truss. But he has inherited a fragile economy from his predecessor, with continued concerns about the state of the housing market.
The market sustained hits on several angles, namely from Kwasi Kwarteng’s ill-fated “mini-budget” growth plan earlier this month.
The damage has since led to warnings that the UK is teetering on the edge of another crash.
The Council for Licensed Conveyancers recently warned that the country faces a crisis akin to the 2008 financial crisis.
The industry body told law firms in a note that solicitors may need to brace for a 40 percent transaction reduction.
And it warned that they should “consider how they would respond” to a significant economic downturn.
Firms focused on conveyancing should prepare a contingency plan that “sets out steps they would take to protect the business in the event of a fall in transaction volumes” akin to the previous crisis.
Activity in the property market has notably reduced in recent weeks following the mini-budget, with mortgage and remortgage rates rising.
Ben Woolman, Director at property development firm Woolbro Group, said Mr Sunak must now “work at pace” to undo that damage, as he has an “enormous” challenge ahead of him.
Mr Woolman said: “Rishi Sunak must now work at pace to undo the damage that Kwasi Kwarteng’s mini-Budget inflicted on the housing market.
“The scale of the challenge ahead of him in tackling Britain’s housing crisis is enormous, however, things are already looking up for the new PM.
“Firstly, mortgage rates fell for the first time since the start of September on Friday, though they are still uncomfortably high at 6.55 percent for an average two-year fixed rate deal.
“And following Jeremy Hunt’s scrapping of most of the tax breaks announced in the mini-Budget, Mr Sunak’s background in finance could serve as an additional calming influence on markets.”
“This, subsequently, should eventually bring mortgage rates closer down to earth again.”
While Mr Sunak has received some early good news, he still faces challenges, Mr Woolman added.
He warned that, without additional help, the Conservatives may struggle for support come 2024.
He said: “The former Chancellor must still exercise caution when planning his next move to tackle Britain’s housing crisis.”
“While his pledges to scrap the Government’s 300,000 homes-a-year target and block greenbelt development would have resonated with Tory voters during his leadership bid this summer, they would have done little to help struggling first-time buyers in reality.
“Mr Sunak should therefore be mindful that 2024’s general election will come around quickly – and many voters still struggling to get a foot onto the property ladder will be unlikely to show their support at the polls.”
“First and foremost, Mr Sunak must get long-overdue reforms of Britain’s planning system over the line once and for all.
“It is unquestionably the greatest barrier to delivering the new homes this country needs and, therefore, tackling our housing crisis.”