Knight Frank has taken the unusual step of warning that Tory splits over Rwanda and immigration could force an early election – and all that means for the housing market.

Tom Bill, head of residential research at the agency, says in a new analysis of the housing market: “Ideological splits within the Tory party on the issue of immigration may mean that Rishi Sunak does not ultimately have full control of the election timetable, which adds a layer of uncertainty. 

“A backbench Brexit rebellion forced former PM Theresa May to resign in May 2019 and Sunak’s Rwanda bill is proving equally divisive inside his own party. 

“If anything, the political splits at Westminster and within the traditional voter bases of the two main parties that began with the Brexit vote in 2016 feel like they will get wider this year.”

However, Bill is relatively confident that the market will become stronger in 2024, especially if Sunak can keep to his intention of holding an election in the second half of the year.

Indeed, Bill hints that because the market is doing better than expected – especially on the sales side – he will be revising Knight Frank’s 2024 forecast upwards in the near future.

He says: “Buyers and sellers could be forgiven for thinking that the economic news in the final quarter of 2023 was too good to be true.

“Sub-4.0 per cent inflation means speculation has turned to the number of rate cuts in 2024 rather than whether they have peaked. Money markets were pricing in five cuts of 0.25 per cent last week.

“… Demand this year could be further boosted by pre-election giveaways in the Budget on March 6. There is speculation surrounding tax cuts as well as measures to help first-time buyers including longer fixed-term mortgages, smaller deposits, and a revived help-to-buy scheme.”

His colleague Simon Gammon – head of Knight Frank Finance – adds: “What is encouraging for the property market is that these cuts are across the board, for all loan-to-values and mortgage types.

“The best rates are currently around four per cent but I would expect to see more products starting with a three fairly soon. Lenders are trying to stimulate the market after a poor 2023 so the margins will be tight. 

“For context though, we don’t expect considerably lower rates anytime soon.”