Donald Trump’s return to the White House has triggered significant shifts across global markets, and the UK property sector is no exception.
While his victory has provided clarity in some areas, it has also introduced fresh complexities for investors and homeowners.
Calming immediate concerns but stirring inflation fears
Trump’s decisive win alleviated fears of civil unrest and market volatility. Predictably, US Treasury yields saw upward pressure as expectations grew for sustained high Federal Reserve rates to combat inflationary forces. His policies—tariff impositions, reduced reliance on cheap imported labour, and tax cuts—are expected to keep inflation elevated.
For the UK, this spells challenges. Higher US yields could limit global investment flows into UK markets, potentially keeping UK borrowing costs higher for longer. The Bank of England’s recent rate cut to 4.75% was welcomed, but the pace of further reductions is likely to slow in the wake of the Budget.
Mixed signals for UK mortgage rates
Trump’s win adds uncertainty to the UK’s interest rate outlook. While bond markets reacted cautiously to the recent UK Budget, the weak take-up of UK gilts last week indicates nervousness about the government’s borrowing trajectory.
On the upside, if Trump’s policies drive a weaker dollar, the UK could attract more international capital into its debt, equity, and real estate markets. This would reduce UK bond yields and ease mortgage rates over time, says Savvas Savouri, chief economist at Quantmetriks. However, the Labour government’s plans for aggressive tax hikes in the private sector could spook markets, raising borrowing costs and dampening near-term housing demand.
Property market under pressure but opportunities remain
Higher borrowing costs are putting downward pressure on UK house prices, particularly in areas reliant on mortgage-backed buyers. The five-year interest swap rate climbed above 4.3% last week, compared to under 3.9% in early October, reflecting heightened market uncertainty. For homeowners deciding between fixed-rate mortgages of two or five years, the stakes have risen, with many now assessing the likelihood of further rate turbulence.
Despite these pressures, the UK property market retains a key advantage: cash-rich buyers. The majority of UK homeowners own their properties outright, particularly in prime London postcodes, where demand remains resilient.
International buyers eye prime London
Trump’s victory may prove advantageous for prime UK property markets.
- Weaker dollar effect: A softer dollar, should Trump pursue policies to boost US competitiveness, would close the window of opportunity for overseas buyers benefitting from the weak pound. This could accelerate transactions in the near term.
- Democratic exodus: High-profile Democrats and US citizens disenchanted with Trump’s administration may look to relocate to the UK. With the Democratic Party raising over a billion dollars during the election campaign, there’s no shortage of affluent individuals considering new opportunities overseas.
- Middle Eastern interest: Increased geopolitical tensions in the Middle East following Trump’s win could spur Gulf buyers to redirect investment into London and its surrounding areas, long viewed as a stable haven for wealth preservation.
What lies ahead
While Trump’s presidency creates inflationary pressures and complicates the global financial outlook, it also introduces opportunities for the UK property market, particularly in prime sectors. With London remaining a magnet for global capital and cash buyers insulating parts of the market from mortgage rate shocks, investors have reason to stay optimistic.
That said, navigating the next few years will require vigilance. Balancing near-term rate challenges with longer-term opportunities will be crucial for homeowners and investors alike.