Are there signs the new government will boost the property market?
With the election now behind us and summer on the way, will the Conservative government help or hinder the property market?
History tells us two things about the influence of politics on property. Firstly, data collated by HouseSimple.com from 2010 suggested if you have an elected Conservative MP, property prices would grow at a faster rate than other party constituencies. This is pretty inevitable as house prices growth and wealth are definitely connected with more affluent areas, which in themselves are more likely to have a Tory MP.
Further research by eMoov also suggested that property prices grow faster under the Conservatives. When you add to this research the fact that the property market is still in recovery from the credit crunch and initiatives to get people buying new homes, such as Help to Buy confirmed to last until at least 2020, all the signs suggests property price rises could well be on the cards over the next five years.
The one thing to bear in mind though is that since the crash and recession, property prices are reacting very differently depending on the property type, how much you are paying and the area you live.
For example, those buying and selling in the prime market where properties cost millions, saw activity fell prior to the election due to suggestions of a mansion tax being brought in. Now that this isn’t on the cards, they can rest easy which will no doubt help the market thrive once again.
However, whether you are in the prime markets or buying any property in the UK there are many signs that prices might not rise quite as fast as they have in the past, irrespective of who is in government.
Firstly, property prices over the last few years have often been reported as ‘rising’ when in actual fact, they have been going up, following large falls when the credit crunch hit in 2007/8. Areas like Wimbledon fell by 15% (Land Registry) during the crash to 2009 while other areas such as Northern Ireland fell by a staggering 47% (data from Northern Ireland Quarterly House Price Index).
Areas have now divided into three levels of performance since the crash. They may have recovered beyond the peaks seen at the height of the market, which includes London; they have started to recover, so prices are rising but have to reach their peak (East Midlands); or they are still struggling to see any real increases (Liverpool and Bradford).
Secondly, having analysed Land Registry figures in details since the credit crunch and compared this to the last recovery seen after the 1990s, the property price rises and ‘bounce back’ haven’t been as strong as they were in the past - even in wealthy areas like London. The market in London is still buoyant, but price growth has definitely slowed with prices up now by 9% year on year. This is a mix of some areas with no growth while others which have taken a while to recover, are still doing quite well.
Thirdly, there are for the first time new measures which have been put in place to curb borrowing and this definitely appears to be having an impact on demand in expensive areas. Many banks are now restricted to the amount of money they can lend at 4.5x income levels and the Mortgage Market Review which tightened up affordable measures, we are finding less people are able to afford to move and are deciding to stay put.
Overall, although property prices are likely to grow steadily as long as the economy continues to perform well. However, signs are that the high levels of property price growth we’ve seen in the past may not be repeated in the future.
For more information about what’s happening in your area, download my property price and rental reports from www.propertychecklists.co.uk.