Housing market picking up despite political uncertainty

The residential property market is showing signs of improving as “data points to a stronger pre-election housing market than we had anticipated,” according to a leading analyst.

Concerns regarding a pre-election hit to the UK housing market appear to have been overemphasised, according to the investment bank, Jefferies, which has upgraded the residential property sector ahead of next month’s General Election following indications that the housing market is improving in spite of political uncertainty.

The UK broking arm of the US bank estimated that residential property prices in London and the South East could fall sharply on the back of lower transaction levels. But despite a slowdown in the market, Jeffries has now changed its view on the sector, which includes listed estate agents and house builders.

The reverse in views is largely thanks to a greater supply of mortgages, the Help to Buy scheme which has helped the new-build sector “punch above its weight”, and a strong lettings market which has offset the fact that fewer homes are changing hands on the sales market, helping to support estate agents in the process.

Anthony Codling, property analyst at Jefferies, told the press, “The latest data points to a stronger pre-election housing market than we had anticipated. With less than a month before the UK votes, the anticipated slowdown and profit-taking have yet to be seen.

“Election fears have not yet materialised. We had thought that the UK housing market would at best pause for breath and at worst decline significantly ahead of May’s General Election and that profit-taking following strong share price performance in Q4 2014 would be the theme of Q1 2015. We were wrong.”

The latest Halifax property price data, released last week, indicated that the housing market is picking up.

The lender, part of Lloyds Banking Group, said that property prices rose by 0.4 per cent in March compared with the previous month but the annual rate of property price growth slowed to 8.1 per cent. This was marginally down on the 8.3 per cent annual property price growth recorded by the Halifax in February.

Halifax, which expects that annual house price growth will end the year at between 3 per cent and 5 per cent, reports that demand for property was being supported by earnings growth and low mortgage rates.

New analysis from haart suggests that property prices may appreciate even further after the General Election as purchasers and sellers look to get on or move up the property ladder following the pre-election period of perceived uncertainty.

Analysis by hart of house price data since 1983, based on the company’s own figures, across quarters in which elections fell, shows that property prices surge on average 3.2 per cent post-election – compared to dampened pre-election quarterly growth of 0.2 per cent.

If this trend holds true of 2015’s election, then post-election property prices are set to rise by a UK average of £6,539, again based on haart’s own data.

Paul Smith (left), CEO at haart, commented, “Six weeks is a long time in the property market and long enough to tie up a favourable deal. Wise first-time buyers and second steppers will be the biggest beneficiaries of pre-election transactions as our data shows prices are at their lowest this year so far.

“However, our analysis of previous house price fluctuations in election years shows that every post-election quarter experiences a spike in the average property price.

“For sellers wanting to move up the property ladder, holding out post-election to sell means the price of their current home will increase, however, the increase in price on their next purchase will be significantly higher than the value added to their current home in the next few months.”