The UK general election campaign is hotting up as the major parties jostle for voters. But one area that we haven’t heard much about yet is the housing market.
Existing homeowners and prospective buyers could face higher mortgage rates for longer as the election may delay interest rate cuts. The next government also faces a housing supply crisis – an issue banks say needs to be prioritised when Parliament returns in mid-July.
So, what could the campaign period and the election itself mean for the housing market?
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Has the general election affected UK house prices?
Given not much time has passed since Rishi Sunak called the general election on 22 May, it’s too soon to say with any certainty what the impact on house prices has been. It’s unlikely we will be able to get an impression of how the market has reacted until late-June.
When the PM went to the polls, the country was seeing a growing north-south divide in house price inflation, alongside a muted spring bounce. There were also hopes that prices would grow more than expected over 2024 as a whole, despite 16-year high interest rates posing mortgage affordability challenges. This optimism may be partly down to greater pragmatism from buyers when it comes to the type and size of property they go for.
According to research by non-partisan think tank the Institute for Fiscal Studies (IFS), the proportion of home ownership among 25 to 34-year-olds has also only recently recovered to 2010 levels. As of the end of the 2022/23 financial year, the percentage of younger adults who owned their own home stood at 39%. This figure is 20-percentage points lower than what it was in the year 2000. The IFS also pointed out that the home ownership challenge was moving into higher age brackets, with the number of homeowners aged 45 to 59 down seven percentage points compared to 2010.
How have UK house prices reacted to previous elections?
To help us understand what could happen to the housing market, both in the run up to the election and in the period afterwards, several property market analysts have looked at how it reacted around previous national polls.
Nationwide, which tracks house prices at the mortgage approval stage, has found that the broad price growth trends seen in the six months leading up to an election (it has also included the 2016 Brexit referendum) tend to continue in a similar vein over the six months after the polling date. The notable exception was the 2019 election, when prices plummeted in its aftermath as a result of the Covid-19 pandemic.
(Image credit: Nationwide)
When it comes to mortgage approvals around elections, the pattern is less clear. Nationwide recorded a big dip in the wake of the 1997 election, which coincided with then-Chancellor Gordon Brown making the Bank of England independent. The 2019 election also prompted a sharp decline for the reasons MoneyWeek outlined above.
(Image credit: Nationwide)
Chief economist at the building society, Robert Gardner, said: “It appears that housing market trends have not traditionally been impacted around the time of general elections. Rightly or wrongly, for most homebuyers, elections are not foremost in their minds while buying or selling property.”
This finding was echoed by Rightmove. Its spring survey, which gathered more than 14,000 responses between 18 and 23 May, found that 95% of prospective buyers said a general election would not change their plans.
The listing website’s property expert, Tim Bannister, said: “Over the past four years, home-movers have faced numerous challenges, including a global pandemic, a shortage of housing supply, and rapidly changing prices. For many, 2024 is finally the year to make their move, and they’re determined to proceed with their plans to secure their next home.”
Rightmove’s own research into buyer demand in the run up to the 2015 and 2019 elections showed that it remained steady. It measured demand by recording the number of people sending enquiries about properties for sale on its website.
However, in both instances, demand rocketed by a double-digit percentage in the election’s immediate aftermath. In 2015, when the Conservatives secured a majority under David Cameron, demand in the month after the month of the polling date grew 18% year-on-year. In 2019, when Boris Johnson recorded a landslide victory, enquiries rose 14% compared to the previous year.
What does the housing market think could change after the general election?
We have yet to hear exactly what housing policies the major political parties would enact should they form the next government. But some of those involved in the sector have set out the policies and actions they would like to see after 4 July.
One of the most referenced by the experts MoneyWeek spoke to was political stability. Since 2010, there have been 15 housing ministers (or 16 if you take into account the fact that the incumbent, Lee Rowley, has held the role twice), with the ministerial churn having become something of a joke in Westminster. At the same time, housing construction targets have been missed, homeownership rates have stalled, and long-term housing reforms – like the Renters Reform Bill – have struggled to make it through Parliament.
Matt Thompson, head of sales at estate agency Chestertons, said that “increased certainty of the political landscape” would help to “support confidence in the market” and would also “encourage more house hunters” to buy. Robin Thomas, a consultant at Recoco Property Search, added that he hoped there would be a “clear majority” for the next government to give the market “the confidence it currently lacks”.
Other reforms that are high on the industry’s wish list include accelerating the rate of house building in the UK and greater support for first-time buyers. Bannister said: “One way that could help to accelerate house-building is to streamline the planning process, which is highly complex and challenging.
“If the government can create smoother processes, working closely with all key stakeholders, it could transform the delivery of new homes and produce more affordable housing. Not only could this help first-time buyers, it could also open up a big opportunity to help downsizers move to greener homes with lower running costs.”
Rightmove said it would also like to see the “chronic shortage” of build-to-rent homes reversed by the next government. Stamp duty reform came high up on its list too, with the property listing site urging the next crop of ministers to make the existing thresholds permanent, and to index thresholds to regional performance. Before the election was called, Jeremy Hunt was understood to be considering raising the 0% threshold to £300,000.
Another industry bugbear that several experts want to see fixed is the length of time it takes for sales to complete in England and Wales. John Newhouse, managing director of Teeside estate agency Roseberry Newhouse – which is a member of The Guild of Property Professionals (TGPP) – said greater digital integration would “speed up transactions” and reduce fall-through rates. He was echoed by fellow TGPP member Melfyn Williams from North Wales estate agency Williams & Goodwin. He said the Land Registry needs reforming: “This modernisation would include extending current title documents to encompass material information, thereby facilitating quicker and smoother transactions.”
Is now a good time to sell?
So, if you’re considering whether the general election should change your plans to sell up, what’s the latest advice? Generally, the advice is to plough on and take advantage of the spring market.
The estate agency Winkworths said delaying a sale or purchase could mean people miss out on “the best time of year in the property calendar”. Its analysis of HMRC figures found that over the last five years (excluding Covid-affected 2020), spring made up for the highest proportion of annual sales of any region. It also found that properties took 10 fewer days to sell than in winter (51 days compared to 61).
Bannister also suggested it may be a good time to take the plunge now – although he also said he expects that there will be an unusually strong market this summer: “An election in the summer, when the market is traditionally slower, could have less impact on housing market activity than if one had been called for the Autumn. So, as we head towards this election, the housing market is likely to stay active, with activity ramping up once the election is over and things become clearer. It could mean that we’re gearing up for a stronger than usual August, especially if we see interest rates finally start to fall.”
But other experts said sellers may have to expect some hurdles in the run up to the election. Zoopla’s executive director Richard Donnell, said he expects that the campaign “will slow the pace at which new sales are agreed”. He added that current ‘buyer’s market’ conditions meant sellers should “price their homes realistically if they want to achieve a sale” this year.
Another potential fly in the ointment is affordability. With the Bank of England likely to delay an interest rate cut to beyond the election (it has never cut rates just before a national poll since it went independent in 1997), BestInvest’s personal finance analyst, Alice Haine, said: “Election fever can create uncertainty in an economy, with lenders likely to remain cautious, potentially delaying any significant rate changes until the results are in.
“Provided a decisive victory is secured, then coupled with easing inflation and future bank rate reductions, mortgage rates are likely to improve as the year goes on, improving the affordability crunch for buyers. However, those sitting on the fence may be willing to hold off until a rate cut has happened and the dust settles after the election before they plough into the market.”