- Experts predict what impact the election will have on buyers and sellers
For those looking to buy or sell a property, the news of a general election on July 4 may, at first glance, appear to throw their plans into disarray.
Elections usually lead to some stalling in market activity as buyers and sellers put their plans on hold until they know what housing policies are going to be introduced by a new Government.
They also tend to be followed by a ‘market bounce’ where pent-up demand is released, and everyone who has previously held off springs into action.
However, like the surprise announcement of the election date itself, will the housing market respond in a more unusual way this time around?
Some experts suggest there are factors that may have a much bigger influence on buyers and sellers, and the decisions they make – for example, the pace and scale of interest rate cuts.
A predicted summer interest rate cut may prompt buyers to take action rather than hold off for the outcome of the election.
We asked some leading experts in the housing market for their views about what impact this election announcement will have on buyers and sellers.
Richard Donnell, of Zoopla, suggested that it may well depend on how far down the line you are in the selling or buying process.
And there is also the issue of personal circumstances and how motivated buyers and sellers currently are.
For example, you might be a first-time buyer who wants to stop paying record high rents.
Mr Donnell said: ‘The announcement of the general election for July 4 is earlier than may have been expected. Elections normally lead to some stalling in market activity.
‘This general election period will run over the early summer period when market activity tends to tail off.
‘The housing market has been recovering with rising sales volumes and more homes coming to the market for sale, a sign of growing confidence among sellers even though mortgage rates remain at 4.5 per cent to 5 per cent.
‘There are 392,000 homes in the sales pipeline working their way through to completion over 2024. This is 3 per cent higher than this time last year and we don’t expect to see buyers already in the process of working to sales pulling out.
‘The impetus to move remains for many households, in particular, first-time buyers escaping the rapid growth in rents in the private rented sector and upsizers who delayed moving last year when mortgage rates moved higher.’
Delaying decisions
However, Mr Donnell said that the election announcement could slow down the sales process for some.
‘The election announcement is likely to stall the pace at which new sales are being agreed in the coming weeks as we run up to the start of the summer slowdown. Most buyers well into the home buying process close to agreeing a sale will ideally want to push through and agree to sales now,’ he said.
Overall, we don’t see the election having as big an impact as in previous years
‘Those who are earlier in the process may look to delay decisions until the autumn after the election is over.
‘Overall, we don’t see the election having as big an impact as in previous years, particularly as there is not a huge divide in policy between the two main parties and with few specifics on housing other than a focus on reforming the private rental sector and boosting housing supply.
‘However, sales completions over 2024 may now fall slightly short of the 1.1 million we expected for 2024.
‘What businesses and landlords will want to see from all political parties are concrete plans for how we can boost housing supply across all tenures while getting the right reforms to the private rented sector to ensure we maintain supply while giving renters more protections.’
Meanwhile, Kate Eales, of estate agents Strutt & Parker, suggested that the calling of the election can be met with a sigh of relief.
She said: ‘The news of the general election being just six weeks away should be met by the market with a sigh of relief rather than a gasp of panic.
The news of the general election being just six weeks away should be met by the market with a sigh of relief rather than a gasp of panic
‘The small window of warning gives little time for any added uncertainty or nervousness, and is good news for people wanting to sell quickly, particularly if they have deadlines to meet like the school term in September or a new job.
‘Those who have been leaning on a “wait and see” attitude can now proceed with confidence as, regardless of the election result, the remainder of the year will deliver a busy market fuelled by those who have been sitting on their hands and a more buoyant economy.
‘Positive inflation figures and mortgage lenders pricing in anticipated interest rate falls have already delivered a busier market in recent weeks, with renewed motivation and confidence from both buyers and sellers alike.’
Post-election bounce
And Tim Bannister, of Rightmove, agreed that it is likely that the summer election is likely to have less of an impact that if one had been called in the autumn.
He said: ‘A look back at recent elections shows that house prices and activity usually hold steady in the lead up to the event, and we often then see a post-election bounce.
‘It’s taking over seven months to move on average and we’re still seeing pent up demand from last year flowing through into 2024.
‘This means that, for many, the desire to get on with moving is likely to outweigh waiting to see what new policies the Government could bring in.
‘An election in the summer, when the market is traditionally slower, could have less impact on housing market activity than if one had been called for the autumn.
‘So, as we head towards this election, the housing market is likely to stay active, with activity ramping up once the election is over and things become clearer.
‘It could mean that we’re gearing up for a stronger than usual August, especially if we see interest rates finally start to fall.’
Meanwhile, Lucian Cook, of estate agent Savills, suggested that issues such as affordability and interest rate cuts are far more likely to have a big impact on the market.
He said: ‘Affordability is by far the biggest factor in the mainstream housing market.
‘Accordingly, we expect the pace and scale of interest rate cuts to have a more significant impact on the market than the timing or outcome of the general election, not least because of the short odds on a change in government.
‘Headline inflation’s fall to 2.3 per cent in the year to April indicates two or three bank base rate cuts, this year.
‘That is likely to mean mortgage markets remain relatively stable in the short term, with the prospect of lower borrowing costs as the year progresses.
Perhaps the biggest impact of a July general election is the prospect that the Renters Reform Bill will struggle to be enacted before Parliament is dissolved
‘And with a shorter-than-expected run into the general election, there is more opportunity for buyer demand to gain traction over the autumn, with most of the uncertainty behind us.’
A recent survey by Savills revealed a ‘degree of ambivalence towards the prospect of an election, according to Mr Cook.
A total of 79 per cent of respondents said it had no impact whatsoever on their commitment to move over the next 12 months.
Mr Cook added: ‘While a change in Government would be unlikely to materially change the macro-economic backdrop, current indications are that it would result in a change in the focus of housing delivery and planning, with Labour putting its ambition to deliver 1.5 million homes over the next five years high up its political agenda.
‘While that has the potential to change the housing landscape over time, it is unlikely to have a significant impact on the market in the near term.
‘From a policy perspective, perhaps the biggest impact of a July general election is the prospect that the Renters Reform Bill (which currently sits at the Committee Stage at the House of Lords) will struggle to be enacted before Parliament is dissolved.
‘However, with both main parties advocating reform in this area, it remains a case of when, not if, we see the abolition of the Assured Shorthold Tenancy across England and Wales, the main issue being the manner in which new regulations are introduced and the balance between protecting Landlord and Tenants interests.
‘In that respect, close attention is likely to be given to the potential impact on the availability of homes to rent in an already undersupplied market.’