Looking to the past: how do general elections affect house prices?
Historically, the housing market has often seen a pre-election dip in activity. Data from the last nine general elections shows that transactions usually slow down in the months leading up to a general election.
This is likely to be because many people are hesitant to buy or sell before they know the outcome of the election.
However, the number of sales typically bumps back up once the outcome of the election is known.
In the lead up to the general election in May 2015, a sluggish housing market saw a drop in transaction levels followed by a post-election rise back up to expected levels by June.
Despite the slump, house prices continued to rise steadily throughout 2015 at about the same rate as in 2014 and 2016.
What’s happened this time around?
The announcement of the general election on 18th April so far seems not to have had a dramatic effect on house prices.
The latest figures from the Office for National Statistics confirm a slowdown in the market. Average house prices in the UK increased by 4.1% in the year to March 2017, down from 5.6% in the year to February 2017.
This continues a general slowdown in the annual growth rate since mid-2016, which is good news for those looking to buy in the near future.
But while uncertainty around the election may be contributing to the slowdown, it appears from these figures it’s simply continuing a trend that had begun before the election was announced.
What will happen next?
The snap nature of the announcement means there’s a much shorter lead up to the election than usual. With the election called just weeks before polling day, the market had little time to react.
However, according to the Royal Institute of Chartered Surveyors, the election is likely to slow the short-term growth of house prices.
RICS said their measure of how house prices are likely to change has dropped from +11 to +4 for the next three months, their lowest reading since July 2016 – although they still expect prices to rise.
They also said there has been a drop in new property coming onto the market, and enquiries from new buyers have fallen noticeably for the first time since just after the referendum.
Despite this, they anticipate prices will still rise over the next 12 months. With commentators’ predictions of a Conservative landslide further reducing public uncertainty, the market is likely to retain more stability than in previous general elections.
How do general elections affect house prices?
So, how do general elections affect house prices? This time, It appears a little apprehension around the election might be contributing to a general slowdown in the property market.
This may be heartening news for first-time buyers who have so far been prevented from entering the market by soaring prices.
Until we know the outcome of the election, it’s hard to say what will happen beyond that.
With a number of developments in the pipeline – including a proposed ban on letting fees and the Starter Homes initiative – it looks set to be an interesting year for the property market whatever the result.