The property market has always been considered a stable investment. Unlike stocks, which rise or fall with the wind, property is solid; both in terms of the brick and mortar it's composed of, and its reliability. While stocks are seen as the quicker, riskier route to investment success, when you invest in property, you're playing the long game.
However, in periods of uncertainty, such as the build up to a general election, even the property market finds itself on shifting sand. In fact, the only ones enthusiastic about the prospect of moving into a new home at this time are the candidates vying for the key to number 10 Downing Street.
Furthermore, with the country in the midst of a housing shortage, and many first time buyers being priced out of the market, election candidates will be looking to make as many morale-boosting promises as they can in order to win votes.
Why all the fuss?
Few issues have elicited more concern than the state of the UK property market. A housing shortage coupled with exorbitant prices make it difficult for home seekers, especially those of younger generations, to get a foot on the property ladder.
As such, both parties are making various claims as to how they will rectify the situation, with voters being left in the dark about which party will have the chance to carry out their proposed policies, assuming they intend to carry them out at all once they actually obtain their seats.
What does it mean for property investors?
If you have an interest in property investment or you're looking for a new home, you'll be wondering in what tangible way the build up to the general election will affect you. Experts are anticipating a slowdown in the market as people will be more reluctant to buy, which in turn makes it harder to sell.
Anthony Codling, a housing analyst at the broker Jefferies, has studied the relationship between general elections and the property market. Based on statistics gathered from the last seven general elections, he has determined that housing transactions normally drop around 3 to 8 per cent in the 4 months preceding an election, and are at their highest 6 to 12 months before elections as well as 1 to 6 months following elections.
But what about the effect on house prices? Codling’s analysis shows that average prices 12 months before the election are 4.9% lower than they are during the election period, but have usually risen around 8.6% after a year of new government has passed. Furthermore, no month leading up to an election has seen prices exceed the level they are at during the election itself.
So, while the uncertainty may cause the market to slow, prices continue to rise during this period. Either way, property analysts for the most part conclude that the best time to put a property up for sale would be in the months leading up to the general election, before the market becomes too competitive, or in the period that follows an election, when a price surge combined with pent up demand gives property investors the advantage.
Who’s promising what?
It’s no secret that for decades now, government has failed to build enough new homes to keep up with demand. This is one of the matter on which politicians have been most vocal, with virtually every major player announcing a solution one form or other. Based on the pledges being made by the various candidates, whoever wins the election will most likely rely on a combination of the following tactics to resolve the housing crisis.
Based on the pledges being made by the various candidates, whoever wins the election will most likely rely on a combination of the following tactics to resolve the housing crisis.
Build more houses: The most straightforward method for tackling a housing shortage is to build more homes and in the view of many housing analysts, this is the only way the crisis can truly be resolved. Building new homes at least addresses the root cause of the issue, as opposed to home buyer help schemes and funding packages which only help deal with the symptoms.
As such, each party had pledged to do exactly that, though the number and nature of the new homes vary. Labour has promised 200,000 new homes per year until 2020, while the liberal democrats plan to build 300,000 new homes a year. The Green Party proposes 500,000 more social rented units, and the conservative party has announced plans to build 200,000 starter homes for first-time buyers and 400,000 units on brownfield land by 2020.
Garden cities: Sir Ebenezer Howard's dream of building self-sufficient residential communities with easy access to transport and public services and a wealth of greenery may not have caught on initially; but has lately gained traction as a potential means for alleviating the housing crisis. Certainly the term has been popping up frequently in various party manifestos. The liberal democrats, for example, have pledged to build 10 new garden cities as part of their election campaign.
Housing schemes: According to the Guardian, the Conservative Party has made their proposed expansion of the right to buy scheme one of the focal points of their election campaign. Under the new scheme, 1.3 million housing association tenants who have resided in their property for more than 3 years would have the opportunity to buy it at a discount price.
Taxes: According to the Economist, Labour’s proposed mansion tax, which would apply to British properties worth over £2 million, has proved unpopular in some quarters; mainly those with big houses. However, Labour claims the tax would raise about £1.2 billion a year, and that homes just over the £2m threshold would incur around £3,000 a year in taxes.
What does it mean for the housing market?
Of course, whether or not any of these proposals come to fruition depends not only on who wins the election, but also on whether they're able to follow through on their proposals once they have their seats. However, even the potential for significant change is enough to ensure that the housing market will feel the impact.
If you're looking to get involved in the housing market, whether as an investor or a home owner, don't hesitate to contact the experts at Tepilo for professional advice.