OPINION - Buyers desert the London housing market

 (Ben Turner)
(Ben Turner)

The political calculation at the heart of the energy price guarantee wasn’t its cost. Rather, it was that the government sensed it wasn’t going to get much credit for it. This came to pass, as focus groups would find people sarcastically saying ‘thanks, so my energy bill is *only* double what it was last year’.

The real unforced error was on mortgages. As I’ve written previously – partly to say something nice about the government but also because it’s true – interest rates were already rising around the world prior to the disastrous ‘mini-budget’ (a term that may perplex economic historians of the 22nd century).

Neither the US Federal Reserve (4 per cent) nor the European Central Bank (1.75 per cent) increased their rates in recent months because of anything Kwasi Kwarteng said in his statement on 22 September, unironically called “The Growth Plan”. To suggest otherwise would reveal a bad case of main character syndrome.

The mini-budget, with its unfunded tax cuts and subsequent market turmoil, undoubtedly made things worse. The Bank of England said as much yesterday. But how much does this matter now, with a new prime minister and chancellor in place?

Economically, it does so only at the margins. Every additional 0.25 percentage point increase in interest rates or £50 monthly mortgage rise counts – it might make the difference between a family being able to scrape the funds together to meet their new repayments or being forced to sell their home at a discount. But the reality is that with inflation at double digits, borrowing costs were going to continue climbing in the UK as they have elsewhere.

And we are already seeing the impact. Business Editor Jonathan Prynn reports that demand for homes in the capital has almost halved since the mini-budget, as thousands of panicked buyers jettison their plans to purchase.

The latest data from online property portal Zoopla shows a 45 per cent drop in the number of people making direct enquiries with estate agents, seen as an accurate measure of activity in the market. That fall, larger than the UK average, suggests the London market – where prices are at all-time highs and by far the most expensive in the country — is most vulnerable to the impact of mortgage rate increases.

Perhaps there is a certain poetic justice in the Tories enduring 100 per cent of the blame for something that is only partially their fault. After all, that was the playbook that helped David Cameron defeat Gordon Brown in 2010, when he managed to convince enough people that Labour overspending was the cause of the Global Financial Crisis.

Unfortunately, voters of 2022 can’t pay their mortgage, fill up their car or re-stock their fridge on poetic justice.

Elsewhere in the paper, arts correspondent Robert Dex reports that dozens of cultural organisations, including the theatre group that brought stars such as Jenna Coleman and David Harewood to the London stage, are set to quit the capital to keep their government funding.

The exodus has been sparked by levelling up plans to spend more outside of London, with Arts Council England ordered to divert at least £24m a year away from the capital. The move casts doubt on the future of the English National Opera.

And in the last few minutes, the RMT has called off national rail strikes due to take place tomorrow, Monday and Wednesday (although Thursday’s Tube strike is still on).

In the comment pages, I say the fall of Liz Truss proves my theory that most people shouldn’t go into politics. While Robbie Smith fears there’s something wrong with Guy Fawkes Night this year, in that all the fireworks have kind of been cancelled.

And finally, see that film star over there? His brother’s a doctor. Check out the movies not to miss at this year’s UK Jewish Film Festival.

Have a lovely weekend.

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