The recent announcement of a snap election by Theresa May has come as a surprise to everyone and has added an extra degree of uncertainty at a time when we are already dealing with the fallout from the EU Referendum.
But what effect will it have on the housing market? Although elections do traditionally cause a slowdown in the housing market, this election is likely to be very different. In 2015, for example, the result was in the balance and there was a lot of talk about the possibility of another coalition. This time it looks far more cut and dried and, whatever your politics, the markets like nothing better than a decisive result.
In addition, the time frame is very, very short. Historically, there is a 3-8% slowdown in the housing market 6 months before an election, and then a return to normality one month after it. The current election was only announced on the 18th April and is now just over a month away.
The fact that there is any uncertainty at all is because after the EU Referendum and the American election, we have started to distrust the polls.
However, the difference in the ratings between the top two parties is so great that anything other than a Conservative victory would be an even greater shock than both those results combined.
Looking at the latest figures, Rightmove’s April ones have just been released, but they are a bit too early to show if house prices have been affected by the election. According to them, asking prices hit a record high, up by 1.1%, whereas Nationwide’s April figures show a 0.4% drop.
Miles Shipside, Rightmove director and housing market analyst says,
“High buyer demand in most parts of the country has helped to propel the price of newly marketed property to record highs. There are signs of a strong spring market with the number of sales agreed achieved at this time of year being the highest since 2007. It remains to be seen what effect the run-up to the snap election will have, though any slowdown in activity will be counterbalanced by the market’s current fast pace.
Indeed, in locations where choice of suitable property is limited, hesitation could mean losing out to others who still decide to act.”
There is, however, a caveat; Shipside goes on to say that stretched affordability is acting as a break on prices, especially in London, where they have fallen by 1.5% over the last year and by 4.2% in Inner London.
Together, Nationwide’s and Rightmove’s figures paint a rather contradictory picture. But, looking back over the last quarter, that picture becomes far clearer – all the major indices had been showing signs of slowing growth before the election was announced.
So, although the election may (or may not) have a very short term dampening effect, the underlying trend is of a patchy slowdown caused by those affordability issues cited in both Rightmove’s and Nationwide’s reports.
It is most pronounced in areas where the biggest growth occurred over the last few years, such as London, whereas growth is accelerating in areas such as the Midlands and the North, where prices had been relatively stagnant and homes still represent good value for money.