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The Election Effect: How is the property market impacted?
Leading up to the UK’s 2024 General Election, the property market is braced for potential changes with agencies, landlords, and homeowners forgiven for trying to understand what to expect in the property market.
Despite the political climate, the market often fluctuates with contrasting signs of slowing down or recovering thanks to different factors, such as the warmer weather, improving mortgage rates, and growing demand. However, a General Election can bring uncertainty in the economy across the UK, and the property sector is no exception.
This article explores the diverse impact of elections on the property market, offering insights for estate agents and property professionals alike.
The election effect
Historically, the lead-up to a General Election has been characterised by a slowdown in property market activity. This phenomenon, often referred to as the ‘election effect’, stems from the uncertainty surrounding future policies and their potential impact on the housing sector. Buyers and sellers alike may adopt a ‘wait-and-see’ approach, leading to a temporary lull in transactions.
For property agencies, this period presents both challenges and opportunities. While the overall market may experience a slowdown, proactive agencies can use this time to prepare properties for future sales and advise clients on strategic timing.
Reading the market during election season
Despite differing suggestions about whether the UK’s property market is looking healthier, recent research suggests that confidence in the housing market began to ebb despite a markedly improving outlook over the last few months. Geographically, the softening in demand was most pronounced in the South East and South West of England. Meanwhile, when it comes to sales activity, May did see a decrease in the number of sales agreed, according to survey respondents.
However, even during an election, people still need to buy and sell properties, carry out home improvements, and seek expert advice from building surveyors. Today, the outlook remains cautiously optimistic with market professionals anticipating a slight uptick in sales following the General Election and into the next quarter of 2024. The long-term forecast appears more positive, indicating a growing confidence in the market’s resilience. It’s also important to add that the property market is never static with regional variations persisting.
Marketing property in the shadow of an election
The fluctuating sales and marketing trends during and following an election do highlight the complex interplay of factors influencing the UK property market, from economic indicators to regional disparities. For buyers, sellers, and property professionals, staying in tune with what is happening, and being able to make informed decisions in a dynamic market is key.
For estate agencies supporting sellers marketing a property, there are valuable tips to make the process as smooth as possible even when their thoughts could be focused on who will be in government and what will happen to prices, mortgages, taxes, etc. For property agencies, the key to navigating this period lies in providing clear, factual advice to clients, including:
- Emphasise market stability and highlight properties with long-term value.
- Focus on presentation and encourage sellers to show properties in their best light.
- Target motivated buyers, identify and focus on serious buyers who need to move regardless of the political climate.
Understanding potential policy changes and their impact
The relationship between elections and the property market is complex, with change often creating temporary hesitation in market movement. Likewise, governmental change can present opportunities for buyers, sellers, and property professionals. From first-time buyer initiatives to sustainability mandates, the incoming government’s policies could reshape the entire market landscape.
Looking at the UK’s two main parties, they gave varying tax announcements in their manifestos related to the housing market. While Labour remained silent on capital gains tax, inheritance tax, and council tax, they did indicate areas where future tax changes might occur. Meanwhile, the Conservatives suggested several impactful housing tax policies, including:
- Maintaining private residence relief which exempts capital gains on the sale of a primary home from tax.
- Not increasing capital gains tax which can affect property investments.
- Offering temporary capital gains tax relief proposed for landlords who sell properties to existing tenants.
- Council tax increases to a number of bands, council tax revaluations, and cuts to tax discounts
- Permanently abolishing stamp duty tax for homes up to £425,000 in England
In general, their housing policies seemed to be aimed at reducing tax burdens on homeowners, investors, and first-time buyers. Political parties like to attract first-time buyers with promises of support and share a positive drive to expand shared ownership schemes and get behind the help-to-buy initiatives. Such valuable measures will potentially stimulate activity across the housing market especially at the lower end of the spectrum.
An increase in the stamp duty threshold could stimulate transactions, particularly in areas with higher average property prices. Conversely, a reduction or the introduction of additional bands could dampen demand in certain price brackets. Financial factors influence homeowners who may be deciding whether to buy or renovate with extensions for more desirable living spaces, kitchen upgrades, and other home improvements that attract buyers.
Whatever happens, politicians were keen to attract the Landlord’s vote with 2.82 million private landlords in the UK. The potential impact of increased capital gains tax on property sales would, they were aware, have far-reaching effects, sparking investors to sell properties before increases take effect.
Prioritising Sustainability in the Property Sector
With climate change high on the political agenda, sustainability in the property sector featured prominently with parties keen to back eco-friendly housing measures on existing properties, new builds and via incentives for renewable energy adoption.
These initiatives may significantly impact property values with energy-efficient and sustainable homes potentially commanding premium prices down the line. Popular sustainable housing policies could include:
- Smart meter rollouts
- Stricter building regulation
- Carbon-neutral targets
- Grants or tax relief for installing solar panels and renewable energies
To summarise, following an General Election, the UK property market often experiences a resurgence of activity. Known as a ‘bounce back’, this renewed market activity can be attributed to demand and increased knowledge about the new direction of housing policies. These will, of course, vary depending on the outcome and any policies related to housing from the incoming government.
While elections can create short-term fluctuations, the fundamental drivers of the property market – demographics, supply and demand, and economic factors – remain constant. By staying informed and adaptable, agencies can turn the challenges of elections into opportunities to maximise marketing potential and provide helpful post-election advice for buyers to make informed decisions.
Written by Agency Express guest writer Annie Button
