05 Oct Why the Election affects UK Property Prices
Come the dawn of the year 2015 you won’t be able to miss the fact that it’s “Election year”. On 7th May 2015, the whole of the UK will once again be urged to visit the polls and vote for their choice of party. The months leading up to the election will bring with it acres of press coverage, and among the business and financial pages there will be a lot of talk about its effect on the economy.
But, an upcoming election also affects UK property prices. Why?
This is because uncertainty over the future always brings with it speculation as to what might happen. If you don’t know what’s going to happen to the governing of your country, you’re less able to make decisions about your own future. And that includes buying and selling houses either to live in or from an investment standpoint.
Initial surge of activity, then slow-down
Typically, there is an upsurge in property transactions in the months leading up to an election. This is because sellers want to complete the transaction well in advance of the election, to save being affected by any new policies or procedures a new or re-elected Government might decide to bring in. This surge in activity will affect house prices, sending them up or down depending on supply and demand. In terms of UK property prices, it nearly always means prices going up as demand outstrips supply.
However, immediately before an election the property market becomes more sluggish. Too close to the election and sellers know that there is a chance their sale won’t complete in time. Both buyers and sellers then take more of a wait and see approach. With fewer buyers and less sellers around, there’s less movement in prices.
Although the Government does not rule on interest rates, it does rule on economic policy, and that affects what all of us have in our pocket. Any new Government will also stipulate a housing policy, which will affect how many homes will be built in the foreseeable future. It could slow the market down as supply edges closer to demand, or vice versa if new builds slow down. All of these elements affect UK property prices.
Proposed mansion tax
At the high end of the market, the prospect of a mansion tax, proposed by Labour, on multimillion-pound properties, will affect sales in this area. Those at the lower end of the proposed scale – around the £2m mark might feel forced to sell up. It might also deter people from buying properties in that threshold, as they don’t want to have to pay more tax. In addition, plans are afoot to change Capital Gains Tax (CGT) liabilities for overseas owners in line with UK nationals, primarily affecting the London market.
It also depends on what Government we end up getting. One that has a decisive win will inspire confidence in the property market because there won’t be constant to-ing and fro-ing about policies. One that doesn’t, will leave us wondering, and we might take a further wait and see approach.
For expert advice on property prices in Chalfont St Peter, Chalfont St Giles, Gerrards Cross, Rickmansworth and Beaconsfield please call us on 01494 873663.