"Regardless of who the winning party is, the confidence a finalised election result might bring could give the housing market a small boost."
Typically, before a General Election, there can be a worry that we see jitters in the housing market, much like seasonal dips. However, reassuringly, that is not what we at SDL have seen in the run-up to the current election and there are some strong indicators to suggest we may even be in line for a post-election market pick-up.
Rightmove reports that the upcoming election has not affected 95% of home-movers’ plans, with the number of sales agreed so far in June staying steady and 6% higher than a year ago.
Regardless of who the winning party is, the confidence a finalised election result might bring could give the housing market a small boost.
The current situation is similar to that of 2019, when buyer demand remained stable in the months leading up to the election. In October 2019, demand increased by 1% year-on-year, followed by a 4% increase in November. During the election month of December, demand surged by 13% year-on-year, and this trend continued with a 14% increase in January 2020, according to Rightmove.
Similarly, 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, Rightmove data shows. During the election month, demand rose by 9% year-on-year, and this increase accelerated to 18% in June, with the market benefiting from a post-election boost.
If we do see what is expected — a summer cut to the Bank of England’s base rate — accompanied by a post-election ‘buzz’, we may well see a welcome boost in transactions; especially if there is some form of housing initiative such as a Stamp Duty cut from the new Government.
Recently, we saw Savills report the market has returned to its pre-pandemic size of £342bn. While this might sound like good news, we are still some way off in terms of transactions, with 15% fewer completed transactions in the year to March compared with the 12 months to March 2020, when the first UK lockdown began.
The latest figures from HMRC show, on a seasonally adjusted basis, the number of UK residential transactions in April 2024 was 90,430, while this is 10% higher than April 2023 and 5% higher than March 2024, if we go back to pre-pandemic April 2019, transactions figure sat at 98,250.
Overall, housing transactions for 2023 were just over one million, compared to almost 1.2 million in 2019. However, barring any unforeseen circumstances, I fully expect that in the twelve months following the election, we should climb our way closer to April 2019’s transaction levels.
UK Finance is currently projecting gross mortgage lending of £215bn for 2024, down from £226bn in 2023. Without tempting fate, I wouldn’t be surprised if we actually see figures higher than this. While we might not reach 2019’s gross lending of £268bn, up to £240bn seems perfectly plausible.
Post-election house price outlook
When it comes to house prices, it can be challenging to gauge the direct impact of an election, as other events in the wider economy often coincide.
Recently, I saw data from eXp UK showing house prices have climbed by an average of 5.4% in the year following a General Election since the 1980s. Its analysis revealed house prices have increased in the year following every General Election since 1983, with the exception of 1992 and 2010.
The highest rate of inflation-adjusted house price growth followed the 1987 general election when Margaret Thatcher won her third term as Prime Minister. In contrast, the lowest rate of positive house price growth after an election came following Theresa May’s election in June 2017.
Interestingly, it was reported that following the election of a Conservative Prime Minister over the last 10 elections, house prices have climbed by an average of 4.6%, while this growth climbs to 10.9% in the years following the election of a Labour Prime Minister.
However, research from Nationwide, which also looked at the impact of a General Election on house prices and mortgage transactions, concluded there does not appear to be a tangible impact in the three months either side of a nationwide polling day. So, perhaps we shouldn't get carried away just yet.
Either way, I do not foresee a significant drop in house prices unless we encounter some form of unforeseen event. I would edge towards a market pick-up rather than a reversal — at least in the aftermath of the Election. One of the main drivers of an increase in house prices is a rise in transactions, which would certainly be positive news for the market.
