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June 03, 2024

The Potential Impact of the General Election on the UK Housing Market.

Despite the upcoming general election, the UK housing market is poised for a robust summer, showing resilience and stability in the face of political changes.

By Jacob Baxter
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According to data from the property portal Rightmove, a significant 95% of buyers have indicated that the upcoming election will not affect their moving plans. This sentiment is supported by historical data, which shows that the housing market has remained strong around previous election periods.

Rightmove's analysis of buyer demand around the 2015 and 2019 general elections reveals interesting trends.  In the two months leading up to the May 2015 election, buyer demand increased by 5% year-on-year in March and by 6% in April. During the election month, demand surged to 9% year-on-year, with an impressive 18% increase in June, benefiting from a post-election boost.

Similarly, in 2019, buyer demand remained stable in the months preceding the election, with a 1% year-on-year increase in October and a 4% increase in November. Demand continued to rise by 13% in December, the election month, followed by a 14% increase in January 2020.

Affordability and Interest Rates

Affordability remains the most significant factor in the mainstream housing market, currently indicating that the pace and scale of interest rate cuts will have a more substantial impact on the market than the timing or outcome of the general election. This is especially true given the high likelihood of a change in government.

The recent decline in headline inflation to 2.3% in April suggests the possibility of two or three bank base rate cuts this year. Such cuts are expected to keep mortgage markets relatively stable in the short term, with the promise of lower borrowing costs as the year progresses. Additionally, with a shorter-than-expected lead-up to the general election, there is a greater opportunity for buyer demand to strengthen during the autumn, as much of the uncertainty will be behind us.

The Prime Market

While prime property buyers may face higher levels of underlying taxation, such as VAT on private school fees and targeted measures for overseas buyers, domestic buyers appear prepared for these potential changes. The anticipation of a government change has already been factored into many parts of the prime market, especially as more aggressive wealth taxes, reminiscent of the mansion tax proposals of the early 2010s, have not re-emerged.

Current Market Conditions

Despite higher mortgage rates, property prices have held up better than expected this year. As voters prepare to choose between Conservative leader Rishi Sunak and Labour’s Keir Starmer in the upcoming election, housing policies remain a key focus. Labour's ambition to deliver 1.5 million homes over the next five years is a key component of their political agenda. While this has the potential to reshape the housing landscape over time, its immediate impact on the market is likely to be minimal.

Expert Insights

Tim Bannister, Rightmove’s property expert, highlights that with the date now set for a summer general election, housing market activity is expected to remain steady. He notes that over the past four years, home-movers have faced numerous challenges, including a global pandemic, a shortage of housing supply, and rapidly changing prices. Many see 2024 as the year to make their move and are determined to proceed with their plans.

Bannister adds, “Previous elections would indicate we may be set for a particularly strong summer once the election is over, especially if interest rates start to fall. However, every election is different, and significant housing policies could influence market activity for the rest of the year.”

Acorn Property Invest’s Stance

We remain optimistic about the housing market's prospects this summer and beyond. The market has demonstrated resilience and adaptability in the face of political uncertainties. As we move through the election period, we will continue to monitor trends and provide insights to help our investors and clients make informed decisions. The potential for a strong post-election boost, coupled with possible interest rate cuts, could create favourable conditions for both buyers and sellers in the UK housing market.