Is the election really having an impact on the property market?

Is the election really having an impact on the property market?

For months now, there has been speculation about how the property market in the UK would react to the general election. Anyone looking to be active in the market, whether buying, selling, renting or letting property, will have been aware of the different ways that the sector would behave as the election drew nearer. 

Most people have been predicting that as the election came closer, we would see the market for sales start to slow as people feel unsure about how the outcome at the polls would affect the property sector. At the same time, it was forecast that landlords would start to see a shift in their position, with the lack of sales likely to create a spike in the number of people looking to rent a home. 

However, according to Miles Gibson, head of UK research at CBRE, this commonly held belief is actually not as accurate as previously thought. 

"Conventional wisdom suggests that property markets slow as a general election approaches. Elections are uncertain, with the forthcoming election more uncertain than most," he said. 

"However, the data shows that the property market is actually very resilient in the run-up to an election, with little observable change to the overall behaviour of the market, except where a detailed policy has already been proposed, such as the mansion tax."

So, despite the fact many people have said they expect to see the market perform differently in the months leading up to the general election, the reality is that the UK doesn't even have a history of such changes. 

In reality, what is far more likely to cause any sort of change in the market is economic change, both in the market and across the country as a whole. For example, the continued recovery of the UK as a whole may be seen as a positive for the market, but the fact that an economy that is healthy would likely see a rise in base interest rate could actually mean that we see the property market stagnate slightly. 

A rise in interest rates would make mortgages much more expensive in terms of monthly payments, and there would consequentially be a fall in the number of people who were able to afford to get on the ladder. This would send demand down and slow house price rises. 

While that eventuality is expected later in the year or at some point in 2016, it still remains up in the air, but one economic change that we are expecting to see have a real impact on the market - and a positive one at that - has already taken place. 

In December, the government announced that it is changing the way stamp duty is calculated on purchased homes. Rather than the archaic block system where all of a home's value was taxed at the same percentage, the change sees an income-tax style band system whereby houses are taxed proportionately, with only the amount above each limit being taxed at that price. 

It means that the vast majority of people will be paying less stamp duty than they would have been in the past, which should bring more people to the market, making it far more fluid. We expect it to increase demand, which should see house prices increasing, making it a fantastic time for sellers. 

In addition to this, the fact that more and more people are able to pay less under the new system should stop one of the biggest hindrances for sellers in recent years. With people trying to beat the old stamp duty bands, we often saw people selling homes for a price near a limit having to cut what they were asking for in order to fall underneath the band, giving the buyer less stamp duty to pay. 

Under the new reforms, we should see people able to achieve the true price for their homes, which means the current economic conditions in the UK are really having a positive impact on residential sales, contrary to the belief from many that the election would see the number of homes for sale at this time of year hit hard. 

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