How do elections affect house prices?

IEXPECT that like me, you’ve probably had enough of elections for a while! Of course, voting is massively important… but once a year? That’s a lot of democracy!

And so, to the property market. Last week a friend asked me my opinion on how elections affect house prices. My immediate reaction was that I wasn’t sure – I hadn’t really looked at this before.

I did some research and I think the results are rather interesting.

I looked at an analysis of UK house prices in elections since the 1955. More specifically, how house prices changed during the year following the elections.

In the year immediately after an election, house prices across the UK have risen by an average of 5.8% following the election of a Conservative government and 4.9% following the election of a Labour government.

Interestingly, house prices under the coalition government of 2010 fell by 3.4% in the first six months before rebounding to an annual growth of 2.2%.

But under a minority government such as the one we have now? Well, not since February 1974 has the UK been ruled by a minority government.

In the six months following that election, house prices rose by just 2.1% before rising more strongly once Labour formed a majority government in October 1974.

The biggest annual changes in house prices occurred after Margaret Thatcher’s retention of power in 1987 (10.3%) and the re-election of Tony Blair in 2001 (11.9%), showing perhaps that stable strong leadership fosters stronger growth in house prices. Where are we today? We’re told that the 2017 election was called as a result of Brexit and the outcome has not provided the mandate that was hoped for. I think it’s fair to say that what happens next for housing and the economy remains to be seen.

Various house price indices published in recent months suggest that values are still growing, but at a far slower pace than last year.

For example, Halifax said recently that annual property price inflation was 3.3% in May, the smallest annual growth in house prices for four years.

Generally speaking, the supply of new homes and existing properties for sale remains low. Combined with continuing low mortgage rates and a high employment rate, this has the possibility to sustain house price levels during the next few months.

Therefore, as far as property prices are concerned, I don’t expect too much change while the current political manoeuvrings are ongoing.

The Election result may lead to some short-term uncertainty. In some ways, there is good news in that with something approaching political paralysis we’re unlikely to see many more changes to taxes or regulation, both of which were in evidence in the party manifestos. The bad news is that uncertainty will potentially result in more people sitting on their hands and doing nothing.

If you look past the shock and surprise of the election result, little has actually changed. No new laws have been passed overnight and for those people already in the buying or selling process, nothing has changed overnight either. For many, it looks like it’s going to be business as usual.

For more thoughts on the Wokingham Property market – visit the Wokingham Property Blog at www.wokinghampropertyblog.co.uk