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Market Insight

Measuring the impact of elections on the market
Winter 2024

It is almost guaranteed that 2024 will be a general election year. The nation must go to the polls before 28th January 2025. But a date in autumn looks most likely, given that dragging voters out to the polls over the Christmas holidays tends to be highly undesirable.

It is received wisdom that people postpone moving home in the run-up to a general election. This view relies on the belief that the possibility of a change of government creates uncertainty about the economy, with concern about the impact on household finances.

But, as our research has uncovered, the reality is rather different. Our findings show that governments will time the calling of general elections very carefully, targeting the period when the economy - and hence the housing market – are strengthening.

Our analysis of the past seven general elections shows that there has typically been a 2% increase in the number of homes that change hands in England and Wales in an election year, compared to the previous 12 months. We argue that this predominantly reflects a strengthening of the economy.

There is also scant evidence that people hold off from buying and selling in the weeks and months before a vote. The number of sales agreed during the three months before a general election also rises by 7% year-on-year in all regions.

The proportion of the year’s sales that takes place in the three months running up to a vote is also larger than that in the same period of a non-election year.

"For the mainstream markets, a general election is not a major consideration: the outcome does not have a material impact on the decision to buy or sell"

There is no evidence to suggest that these are mostly deals being brought forward in case a new party takes power. In fact, the number of sales agreed during the three months following a general election is an average of 6% higher than in the same quarter of the previous year.

However, our analysis also shows that the pre-election boost does not spread to the prime markets, that is homes priced at £2m and above.

The slowdown particularly affects properties in the £5m-plus category: 5-6% fewer such homes change hands during the three months running up to an election. But, in the months after the vote, the number of prime market sales is 12% higher than in the previous year.

Our analysis underlines, that for the mainstream markets, a general election is not a major consideration: the outcome does not have a material impact on the decision to buy or sell.

This is because most election results mirror the opinion polls published in the lead-up to voting day, reflecting the view of the majority. As the election approaches and in the aftermath, most households feel optimistic about the future, whether the outcome brings change or more-of-the-same.

A small group of buyers will play a waiting game. Yet they are heavily outnumbered by new house hunters piling into the market in the face of a strengthening economic outlook. This causes a small drop-off in rental market activity, as tenants seek to climb onto the housing ladder.

Looking forward, there is little to indicate that the forthcoming general election will play out along different lines.

We forecast that the government will seek to delay the election as long as possible to ensure that it takes place against a more optimistic backdrop, with the start of a pick-up in the economy and a downward move in interest rates.

With mortgage rates likely to fall below last year’s level, for most, cheaper finance will more than offset any anxiety about a potential change in government.

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