"Past general elections do not appear to have generated volatility in house prices or resulted in a significant change in house price trends"
- Robert Gardner - Nationwide
The UK housing market remains on a firm footing, with May seeing average house prices rise by 0.4%, according to the latest market analysis from Nationwide.
Nationwide data shows that annual house price growth picked up pace during the month, rising to 1.3% from 0.6% in April, with the price of a typical home in the UK now standing at £264,249 - up £2,287 from April's £261,962.
Robert Gardner, Nationwide's Chief Economist, said: “UK house prices increased by 0.4% in May, after taking account of seasonal effects. This resulted in a slight pickup in the annual rate of house price growth to 1.3% in April, from 0.6% the previous month.
“The market appears to be showing signs of resilience in the face of ongoing affordability pressures following the rise in longer-term interest rates in recent months. Consumer confidence has improved noticeably over the last few months, supported by solid wage gains and lower inflation.
How could the election impact the housing market?
"With the recent announcement that the UK general election will take place on 4 July, we have analysed house price movements in the months around previous elections, and also the 2016 EU referendum.
“Past general elections do not appear to have generated volatility in house prices or resulted in a significant change in house price trends.
“In the chart below we have indexed average house prices so they equal 100 in the election months in each of the years shown. We can then compare house price movements in the six months leading up to each election (t-6 to t-1) and following each vote (t+1 to t+6).
Robert Gardner continues: “On the whole, prevailing trends have been maintained just before, during and after UK general elections. Broader economic trends appear to dominate any immediate election-related impacts.
“We also examined how activity, in particular house purchase mortgage approvals, responded to past UK elections. Here the picture is less clear but again there doesn’t seem to be any tangible impact in the three months either side of a general election.
“2019 is a notable exception, but this was due to the impact of the pandemic, with the initial lockdown in 2020 suppressing housing market activity. Activity subsequently bounced back once restrictions began to be lifted.
“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.”
Industry reactions
Mark Harris, chief executive of mortgage broker SPF Private Clients, says: “With inflation continuing to fall, it looks increasingly likely that a rate cut is on the cards, perhaps not as early as the June meeting of the Bank of England but in August.
"This should give the market a welcome boost after the general election, particularly as some would-be buyers have been waiting for the downward trajectory in interest rates before committing. This, rather than the election outcome, is more likely to influence homebuyer decision making."
Amy Reynolds, head of sales at Richmond estate agency Antony Roberts, says: “Some continued uncertainty around interest rates, economic stability and the cost of living is leading to caution, properties spending longer on the market and harder price negotiations.
“It’s good news that a date has finally been set for the general election as the property market, certainly where we are in southwest London, usually picks up after an election. On the downside, it’s less likely we’ll see an interest rate reduction in June, which will be the Bank of England trying not to be political, yet that decision in itself is political so we shall have to wait and see.
"An interest rate cut in June followed by the election in July would be extremely welcome, giving us a much-needed summer market."
Matt Thompson, head of sales at Chestertons, says: “Some house hunters waited for the Bank of England to cut interest rates earlier this month but as this did not happen, buyers quickly resumed their search.
"Although the announcement of the General Election caught most people by surprise, it was positive news and caused minimum disruption to the property market at the time – particularly in London where demand continues to outstrip supply.
"We expect the increased certainty of the political landscape to support confidence in the market and encourage more house hunters to make decisions. We therefore expect buyer demand to remain strong throughout the summer.”
Jeremy Leaf, north London estate agent and a former RICS residential chairman, says: “Despite not including the increasingly high proportion of cash sales, this historically reliable house price indicator confirms what we are seeing in our offices – buyers and sellers are shrugging off possible uncertainty arising from the forthcoming election and concentrating more on probable near-term falls in inflation and interest rates.
“The increase in property choice is not having a significant impact on values or stopping some hard negotiations on both sides. Appropriately-priced property is still generating considerable interest and offers."
Tomer Aboody, director of property lender MT Finance, says: “Buyer and seller confidence appears to be high, with inflation moving in the right direction and the likelihood of an interest rate cut on the horizon.
“More volume of stock coming to market is needed and would-be sellers need to be encouraged to move in order to help keep prices in check, as even when interest rates start to come down, affordability will still be an issue for many.
"Some assistance to encourage buyers and sellers is required – whether this comes from reduced interested rates, more flexibility on mortgages or potentially some stamp duty reform, buyers need to feel confident that they can commit to a purchase."
