The election of US President Donald Trump will offer opportunities across the UK housing market for investors who “hold their nerve,” says Knight Frank.
Bond markets have taken fright in recent weeks over the impact widespread global tariffs might have if incoming US President Donald Trump carries through his threats.
As part of that assessment, investors are looking again at Chancellor Rachel Reeves’ October Budget plans to spend £70bn over five years and pricing UK borrowing at a higher rate.
The property agent’s head of UK residential research Tom Bill, Knight Frank says: “Before Trump was even inaugurated [which happens today] for his second term as US President, he was having an impact on the UK housing market.”
Earlier this month, 30-year UK government borrowing costs hit their highest level since 1998, while the pound slumped to its lowest level in over a year.
Bill adds: “Borrowing costs have been rising steadily since the Budget, but spiked higher in the first weeks of 2025 as investors bet the Federal Reserve may have to keep rates higher for longer due to inflationary risks under the new President.
“The jitters were no doubt magnified by the so-called ‘January effect’, a month often marked by volatility as investors switch strategies at the start of the year in the search for higher returns.”
Bill points out: “Cracks in the UK housing market have already started to show. Mortgage approvals fell [by 2,400 to 65,700 in November from the previous month, according to Bank of England data] and Halifax said prices slipped in December.”
However, swap rates have eased from highs of 4.3% earlier this month as a result of bond market turmoil.
Two-year swap rates rose to 2.234 % on 16 January from 2.093% a month ago, while five-year rates lifted to 2.292% from 2.071 % over the same period, according to Chatham Financial.
Knight Frank head of the country business James Cleland adds: “The mood of uncertainty has created opportunities for anyone able to hold their nerve.
“For those who can filter out the noise of recent weeks, it’s actually a smart time to buy.
“The quality of stock on the market is high and most vendors recognise the headwinds facing buyers.
“The alternative would be to wait several years for a possible change of government, by which time we expect prices to be more than 15% higher than they are today.”
However, Knight Frank has revised down house price growth to 2.5% from 3% in August due to a slower-moving economy.
This contrasts with rival property agent Savills, which forecasts “robust” average UK house price growth of 4% this year fuelled by falling mortgage costs aided by base rate reductions.