A UK general election, occurring roughly every five years, is a significant political event that often impacts various sectors of the economy, including the property market. This impact is multifaceted, influenced by factors such as uncertainty around specific party policies, as well as overall market confidence and the health of the economy.
It is a common misconception that a general election negatively affects the property market, however this outlook neglects an array of additional factors which contribute to the health of the market around polling time.
Here, we take a deeper look at the influence of a general election on the UK’s property market.
Pre-Election Uncertainty and Market Activity
In the lead-up to a general election, uncertainty tends to dominate the market. Potential changes in government can lead to shifts in policies affecting taxes, housing supply and regulations, which in turn creates a cautious atmosphere among buyers and sellers alike.
Whilst many assume this period of uncertainty results in a slowdown in market activity as people early in their purchase journey adopt a “wait and see” approach; evidence suggests that it actually has little impact on transactional activity. In fact, research from Knight Frank analysed both sales transactions and mortgage approvals – both key indicators of market health – around past elections and found no notable negative changes before and after them.
Similarly, Rightmove recently revealed in its spring survey that 95% of people planning to move home have no plans to halt the process because of the election.
The UK Economy and Market Sentiment
Beyond housing-specific policies, broader economic policies also influence the property market. General economic stability, interest rates, and employment levels are all crucial factors directly affecting the UK property market on a deeper level.
If we consider the wider economic picture, things are looking more optimistic for the property market than they were last year, and this seems to be the main driving force for the improving market sentiment. Inflation continues to fall which has had a knock-on effect for people’s disposable income and, more importantly, mortgage affordability which can directly alter the trajectory of the property market quite significantly. The average 2-year fixed mortgage rate currently lies at around 4.85% for a loan-to-value of 75% instead of the 6% highs of 2023, helping to reattract homebuyers who previously held off buying.
Additionally, a recent GfK Consumer Confidence Index survey indicated that consumer confidence is already at its highest levels since 2021. May and June usually experiences a seasonal uptick in property transactions and with inflation falling to 2.3% in April – the lowest rate since 2021- there is already great optimism for the property market regardless of election outcomes. With mortgage affordability undoubtably being a key factor in the housing market, falling inflation indicates lower interest rates later in the year becoming more plausible, resulting in potential growth as we head into 2025.
That said, government policies that influence interest rates and foster economic growth can boost household incomes, therefore helping stimulate the property market further – particularly as first-time buyers are driven towards buying property to escape the rising cost of renting. Much of people’s attention will be drawn to policies around interest rates as a direct influence over market activity.
Post-Election Market Reaction
Once the election results are in and a new government is formed, the property market typically reacts to the newfound certainty with a boost in market confidence once policies become clearer.
Rightmove’s spring survey analysed property market data around the 2015 and 2019 elections and revealed that buyer demand increased after both elections. In 2019, year-on-year demand increased from 4% in the month before the election to 14% in the month after. Similarly, buyer demand was up year-on-year by 6% the month before the 2015 election, rising to 18% in the month after.
Naturally, every election and market response differs and outcomes can be influenced by the level of housing policies introduced by the new government. However, with wider economic factors improving and market sentiment on an upwards trajectory already, the outcome of the election is unlikely to alter the optimistic outlook for the UK property market.
Policy Changes, Market Sentiment and Long-Term Impact
The longer-term impact of a general election on the property market hinges mainly on the economy, but also on the implementation and effectiveness of the elected government’s housing policies spanning taxes, housing regulations and the planning and delivering of new housing.
With house building policies a common theme across party manifestos, there is widespread assurance that the longer-term outlook for the property market will continue to be brighter.
Whilst such policies will have minimal impact in the short term, they have the potential to change the property landscape significantly in the years ahead – easing the disparity between supply and demand as well as stabilising house prices. However, the success of these initiatives depends on the execution and the extent to which they meet market demand.
UK Property Market: A Long-term Look
Ultimately, confidence within the UK property market has been growing for some time, particularly in London and the South East. With little time between Rishi Sunak announcing the election and the public going to vote, there is little time for the uncertainty associated with a change in government to take effect and cause much disruption. This, plus the fact that more direct factors influencing the property market, such as mortgage affordability and better supply improving means any negative impact of the general election is somewhat mitigated. As such, it is still a very good time for buyers and sellers alike, with confidence in the property market at its highest levels since the pandemic.
The fact that building new homes is a key pledge for multiple candidates implies an optimistic outlook for the property market, regardless of who takes over at number 10. It is evident that a chronic disparity between supply and demand has plagued the property market for quite some time, and producing more homes in light of an increased demand for new builds across the UK will actively help stimulate the market as it continues to make its recovery.
For buyers and sellers, staying informed about political developments and understanding their potential implications is essential for navigating the market during these periods of change.
