Elections and the Housing Market
Voters repeatedly complain that all the political parties are the same and that elections never make any difference. However, the housing market certainly does not behave as if elections are an irrelevance.
History suggests a post-election bounce is around the corner
For each election, house prices were markedly weaker ahead of the election, either showing slower growth or greater falls in prices. By the time the election actually came, the housing market strengthened significantly with prices either rising faster or falling more slowly.
Similarly, volumes of homes actually sold were markedly weaker ahead of three of the last five elections, only to recover sharply by the time the election actually came. In 1992 and 1997, the volumes were broadly flat in the quarter preceding the election.
Propertyfinder’s own survey data shows the same effect. In its forthcoming monthly survey of househunter confidence, a dip in confidence in March has been attributed specifically by a number of respondents to uncertainty over the general election.
Jim Buckle, Managing Director of propertyfinder.com said: ‘Elections have a distinct effect on the housing market. There is no real logic to this, but house-buyers and sellers clearly hold back from taking the plunge until a new government is back in Westminster. We believe that 2005 is no different. The pre-election blues are definitely affecting the market at present, but whoever is elected, we expect a modest recovery in prices in the next three months as well as a slower rate of decline in housing transaction volumes.’
Nick Wright, Financial Director of Andrews Estate Agents puts history into context: “Since 1997, when the Bank of England was given the independence to set interest rates, the traditional pre-election lull appears to have become less evident. Once the key economic tool in managing the housing market was removed from the hands of the politicians, I think that vendors have become less concerned about the outcome of elections. However, no doubt there is still some a hangover from the days when a change of government could drastically affect the housing market overnight”.
