Twindig housing Market Index (HMI) - 24 Sep 2022
In the week that saw housing transactions rise and a mini-budget from the UK's new Prime Minister and Chancellor, the Twindig Housing Market Index fell by 4.5% this week, its lowest level since October 2020 as investors perceived that the mini-budget had major implications for the housing market.
Initially, this week investors were buoyed by the expectation of a stamp duty cut, but as the details of the mini-budget emerged on Friday investors in the residential market were less optimistic.
There is a sense that the new Chancellor's actions are at odds with those of the Governor of the Bank of England and investors felt that after a first glance of the mini-budget, the stakes of the Government's 'big gamble on growth' were too high. It will be interesting to see if investors change their minds over the coming weeks.
Ahead of the mini-budget, UK Prime Minister Liz Truss insisted that she is willing to be unpopular, although we wonder if she anticipated such an unpopular initial response to her plan for growth. Winning over tory members with the promise of tax cuts is one thing, but winning over a nation in a time of economic uncertainty is quite another.
Aside from the mini-budget housing transactions in August were stronger than expected. The announcement of energy price caps for consumers, businesses and charities, coupled with the stamp duty cut will help household budgets, and in our view will aid households' confidence in the housing market.
We note that the changes to stamp duty were a cut, not a holiday, so there will be no surge in transactions as the holiday period draws to a close.
However, rational thinkers and classical economists will ask if interest rate rises will outweigh the assistance offered by the stamp duty cut, whereas behavioural economists will remind us that homebuyers (like ourselves) are irrational and emotional agents and that house prices more often surprise on the upside than they disappoint on the downside.