The Impact of the Election on the Housing Market

With a general election within a matter of weeks, there’s one question on everyone’s lips – what impact will it have on the housing market?

Immediately it seems not much. Recent research from Rightmove, which surveyed more than 14,000 people in mid-May, suggests that 95% of those who plan to move home will not let the upcoming election disrupt their plans.

Instead, the company believes that the confirmation of an election date might end the additional uncertainty that has dogged homebuyers for some time. Rightmove believes that with the date now set the housing market will remain steady in the lead-up to the election which would be consistent with patterns pre-election in 2015 and 2019.

However, if the same patterns are followed then we will likely see a double-digit surge post-election. In 2015 demand increased 18% on the year before in the month following the election in May, while it rose 14% in the January after the December 2019 election.

Building demand

This suggests a summer surge post-election this year is also likely. Certainly, market demand continues to build. The shortage of housing supply and rising house prices have led to a challenging market. High mortgage rates have also priced many buyers out of the market, forcing them to delay moving or to rent instead. High inflation and interest rates have also impacted budgets.

But inflation is now falling, down to 2.3% last month. The next interest rate announcement on June 20 will also be interesting. The rate is expected to be held constant once again at 5.25% although cuts are likely to follow a little later in the year. Along with rising wages such cuts will help to fuel demand since mortgage rate cuts will then follow.

The economy will be a key battleground for all the political parties, eager to win the hearts of voters. When prime minister Rishi Sunak named the July 4 election date on May 22, it was hours after the latest inflation figures had been revealed, a rate which he described as being “back to normal” despite not quite hitting the 2% target. Sunak said this would mean that the pressure on prices will ease and mortgage rates will come down, which will be welcome news for the market.

But wider housing policies will also be a key part of election manifestos. Labour, for example, has previously pledged what it claims would be the biggest boost to affordable housing for a generation, while also freeing up grey belt land for building.

These policies will become clearer over the next few weeks but certainly for homebuyers it’s likely that the pent-up demand in the market is set to be released at last and with a shock election date that’s likely to happen sooner rather than later which will be welcome news to all.

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