As you may have heard by now, last night’s UK general election resulted in a massive victory for Boris Johnson and the Conservatives.In contrast, Labour suffered their most devastating defeat since 1935 after the exit polls suggest they will lose 59 seats for a total of 203.
One burning question that will in no doubt be on the minds of property investors and landlords is “How does this affect the UK property market?”
House price data historically suggests that we can expect modest growth in the months before and after an election. This is due to a number of factors, including how long a prime minister has been in power and what their plans are for the UK housing market upon winning the election.
For example, the months before the May 2015 election saw a 1% growth in property value, which was the highest month-on-month growth rate since 1974.
Also, the 2017 election resulted in 1.3% average price growth in the months directly following Theresa May’s victory which was the highest post-election growth in a single month since 2001.
Although this modest price growth historically shows positivity in the property market, it’s the 6-months after an election where the story really begins to unfold, and if the past two elections are anything to go by, we can expect an even higher level of post-election house-price growth.
The six months following David Cameron’s election victory in May 2015 saw property prices increase by 4.5%. Also, the property market saw a slightly more modest value increase of around 3.6% following Theresa May’s 2017 win.
This show us what happens to property prices after a big election, but what about other political events such as when a PM resigns?
When we look at the figures after Theresa May took over fromDavid Cameron after the Brexit referendum, we can see that property price growth slowed down to an almost standstill at just 0.01%. Similarly, when John Major took over from Thatcher in 1990, the market hit 0% growth.
It tells us that the market responds in direct proportion to the level of certainty within the economy. So when a new Prime Minister takes over after a resignation, nobody knows for sure what their stance on property is, so the market slows to an almost standstill.
In contrast, after a general election when we know the stance of a particular Prime Minister elect, the property market is at its most fluid: more buyers buy, more sellers sell and more investors invest because, regardless of whether the elected government’s stance on the UK housing market, just knowing this sets expectations and introduces more certainty.
The first thing on the agenda for the Conservative party is the get Brexit done and dusted within the next couple of weeks. This will most likely cause buyers and sellers who were otherwise holding off until the result to start making decisions and get moving again.
The Conservative’s stated in their manifesto that they will extend the Help to Buy scheme another two years past the 2021 end date. We think that developers who were holding off their development plans until the outcome of the election will now start pressing ahead with their plans, boosted by an added confidence that nothing drastic is likely to change any time soon and that the Help to Buy scheme will continue to help.
Boris Johnson promised that he would introduce “Lifetime” fixed rate mortgage rates that will further help first time buyers get on the property ladder. Funding for this will be supported by institutional investors.
First time buyers will be required to pay just 5% deposit on their new home while their mortgage payments will be kept at a guaranteed amount for the entire duration of the loan.
The Tories will introduce an extra charge of 3% for overseas investors and companies purchasing UK residential property. We don’t know for certain when this surcharge will come into place, but we expect a surge of activity from overseas buyers looking to purchase property before this is brought in.
If previous elections are anything to go by, then the answer is definitely yes, and soon. We can expect modest growth followed by a higher level of price growth throughout 2020.
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