For the data behind the commentary, download the full June 2026 UK Economy & Housing Report.
All change?
Two significant developments over the last two months should have a notable impact on the outlook for the economy and UK real estate over the course of the next year. We cover the impacts of the de-escalation in Iran in our Investment Marketbeat.
On 22nd June, Keir Starmer resigned as Prime Minister. It looks likely that there will be a relatively quick coronation of Andy Burnham as the new Prime Minister, once nominations open on 9th July. This in itself should be good news for real estate markets, if a prolonged period of uncertainty can be avoided.
While the assumption is that Andy Burnham will be more interventionist in terms of spending and taxes than the Starmer-Reeves regime, there is conjecture as to the future direction of travel for the new government. The likelihood is that this will involve increased devolution, higher levels of social housing construction and further rental regulation.
So far, markets seem to have taken the orderly transition as a positive marker – with the gap between UK gilts against other advanced economies at similar levels to where they were a week previous. As more clarity is given as to the extent of the new Prime Minister’s plans, and a potential new Chancellor, we expect to see bond markets react accordingly if there are indications that fiscal rules may change. For his part, Andy Burnham has maintained that he will stick to the current fiscal rules.
The reality is that the UK’s fiscal position remains fragile, and any plans to increase spending without accounting for taxation would likely have an impact on bond pricing.
For now, the sharp repricing of gilts as a result of the de-escalation in Iran should prove positive. 10-year gilts have come down as low as 4.74%, unwinding the gains seen during the war. This is a positive for the outlook for real estate for the remainder of the year.
