After 14 years in power, the Conservative Government has been ousted by Labour, with Sir Keir Starmer being elected as the UK’s new Prime Minister. A major battleground of the election was focused on housing - both for homeowners and tenants (but not so much for landlords?).
I’ll repeat what I wrote in my previous article though, having described what happened to house prices under the Conservatives:
“No party has ever seen UK house prices decrease during their reign, so those hoping that Labour will get the housing market ‘under control’ by lowering prices may be left disappointed. In fact, it’s almost as if house prices correlate to the popularity of a Prime Minister, which makes you question whether Starmer would actually want them to go down?”
With that in mind, let’s see what happened to house prices the last time Labour were in Government (between May 1997 and May 2010).
Labour roared to victory as the nation thought ‘things could only get better’ under their watch. For those who jumped onto the property ladder that was largely true, as the average house price in the UK rose from £61,946 in May 1997 to £170,846 in May 2010 when the Conservatives took back control. That equates to a rise of 176% in 13 years; or a compound annual growth rate of 8.1% per year.
It was a tale of two (not quite) halves though.
As leader of the party, Tony Blair became the Prime Minister when Labour got elected in May 1997 (when the average UK home cost £61,946). He won a second and third election too, before bowing out in June 2007 (with the average UK home then worth £186,348). After a decade in power, he had overseen a rise in house prices of 201% (11.6% annualised); the highest under any Prime Minister in history.
His departure was quite impeccable in regards to timing the market too, as the financial system around the world began to crack soon after. Leadership passed to his compatriot Gordon Brown on 27th June 2007, who quickly became the man saddled with an economy on the ropes and, with it, a slide in house prices during his term (from £186,348 to £170,846, equating to a decline of 8.3% / -2.9% annualised). This meant he became the first Prime Minister in history whereby house prices fell between the start and finish of his term.
With Liz Truss and Rishi Sunak adding their names to that unenviable list, would Keir Starmer want the same fate to befall him? Perhaps if the rhetoric in this country of house prices increasing being a good thing were reversed then he might. Then again, consider the fact the UK housing market is worth some £8.5trillion. The merry-go-round of increasing prices is what produces equity for people to feel richer and spend money (often via re-mortgaging). If house prices were to fall by 10% that would effectively wipe £850billion off the wealth of the population, which would likely stop them from investing or splurging on holidays, cars and the latest ‘goodies’ i.e the stuff that contributes to the UK’s GDP. To allow that, as the latest Government will surely know, would be political suicide.
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