Next week the UK will wake up on the morning of Friday 13th and find out who holds the keys to No10 and the next move in the Brexit puzzle.
Amongst the various sectors and industries throughout the UK hoping that it is merely coincidence that we find this out on what is universally considered to to be an unlucky day, the property market is waiting with bated breath to see which way house prices might swing as a result.
Historical house price data suggests that during the months immediately either side of an election, price growth is modest at best, with growth following this appearing to be down to a number of factors. These include how long a Prime Minister has been in power, perhaps what their stance on the housing market is and the state of the housing supply as well as major political events near to the election.
The 1.08% growth in the month prior to Cameron’s second successful election in May 2015 (from £193,225 in April to £195,313 in May) was the highest month on month (MOM) pre-election growth rate since Harold Wilson’s second election in October 1974, when house prices grew on average by 2.64%.
One-month growth post-election is a similar story. In the month following Theresa May’s election in June 2017, house prices grew 1.3% on average – the highest one-month post-election growth rate since the 3.6% achieved in the month following Tony Blair’s second successful election in June 2001.
If we look at the growth rates over three months post-election, we begin to see prices, generally, continuing steady growth. However, it’s the price growth six months post-election that tells us the real story.
Following the previous two elections (this does not include when a new PM took post due to a resignation), we have seen the highest level of house price growth, post-election, for 20 years - since Blair was first elected in 1997.
Following Cameron’s successful second election in May 2015, house prices grew 4.56% over the following six months, from £195,313 to £204,223. Whilst May’s election in June 2017 saw slightly more modest growth than this, the UK still saw a 3.62% increase in house prices in the six months following, from £221,833 in election month, to £229,865. This is in comparison to the 1.07% growth over six months following the coalition government forming in May 2010 and the 1.52% and 2.45% growth over Blair’s second and third elections in 2001 and 2005 respectively.
So what does this mean for house prices following our next election?
Ultimately, we know that the housing market responds depending on the level of certainty an event brings. When there has been an incoming PM following a resignation, growth has stagnated in the following months – just 0.01% following May’s takeover from Cameron and post-referendum, and 0% when John Major took over from Thatcher in April 1990.
When that PM or a new one is officially elected, we see a boost to house prices again. Providing the next election brings certainty to and around the UK’s economy and of course, which direction Brexit is going to go and when, we could expect to see the pattern repeat. All the past performances point towards property prices continuing their upwards climb, after initial modest growth in the immediate aftermath of any election.
Andy Foote, director at SevenCapital commented: “What the figures over the past two elections have shown us is that, despite much speculation around whether the UK’s house prices are stagnating, the reality has been far more positive.
Should investors and home buyers be worried about the outcome of the election? If history is to be repeated, they should expect modest growth initially, but once the new PM is in place and their plans for the UK, the economy and, importantly Brexit are laid out, there’s no reason at the moment to not expect a positive rise over the following six to 12 months.”