House prices: how will the election impact the property market?
House price growth is slowing – how much is this to do with the election and what are the other factors in play?
Despite the ‘housing crisis’ being a key issue on the political agenda, the snap election is expected to have little impact on the property market, according to a new report.
While house prices have dropped for the third consecutive month for the first time since 2009 – and now average £207,699 across the UK* – this is most likely to be due to broader economic effects, says Nationwide’s chief economist Robert Gardner, who compiled the research.
Following years of double-digit house price rises, slowing house price growth is to be expected as, with property experts reporting that buyers cannot be stretched much further.
“If history is any guide, the slowdown is unlikely to be linked to election-related uncertainty. Housing market trends have not traditionally been impacted around the time of general elections,” says Gardner.
“Rightly or wrongly, for most home buyers, elections are not foremost in their minds while buying or selling their home.”
Today, buyers and sellers are contending with income pressures as inflation outpaces salary growth.
Last year it was the additional Stamp Duty charges rather than the Brexit vote that caused market activity to slow – and this impact is still being felt.
“As mortgage borrowing is governed by lenders affordability models, those buyers who are coming to the market are armed with what they know to be their upper limit in terms of what size mortgage they’ve been approved for, which means there is little or no room for negotiation on the price of a property,” says Brian Murphy, head of lending at Mortgage Advice Bureau.
“They can’t ‘go back and borrow a little bit more’ in order to meet a vendor’s full asking price, which are reported to have been quite ambitious as of late in many areas of the UK due to lack of available properties for sale.”
The annual rate of growth has slowed to 2.1 per cent – its weakest level in almost four years.
However, with fewer new homes being built and a shortage of properties on the market, Nationwide predicts prices will rise by around two per cent over the course of this year.
*Data is drawn from Nationwide’s house purchase mortgage lending at the post survey approvals stage.