Property Market Update – April 2010 – General Election Special!
It’s been understated, dignified throughout and in no way resembled children chucking mud at each other in a playground: yes, I’m talking about the General Election. Mercifully we are almost at the end of the campaign and in less than a week it will be all over. At that point we can finally resume focus on some of the things that have been getting less column inches than they deserve in the past few weeks, most notably Inter Milan reaching the Champions League final, my band’s gig at the Bongo Club last Friday and, of course, property market news.
However, never being one to shy away from jumping on a zeitgeisty bandwagon (or to invent a new word like ‘zeitgeisty’), I thought that I’d style the April 2010 Property Market Update as an ‘Election Special’. You can rest assured, however, that there won’t be another Election Special for another five years. So, on with the show…
What Effect Has the Upcoming Election Had on Property Prices?
There has been much doom mongering prior to the election with many commentators (my mum and my girlfriend’s dad being among the less well known but probably most vocal supporters of this thesis) saying that the election would cause uncertainty in the property marketplace and prevent buyers from buying. I have to say that I have not heard a single utterance about the election from any potential buyer with whom we’ve spoken in the past few weeks and months. If people are waiting to see what happens to the property market after the General Election then they certainly are keeping a very low profile and not enquiring about property AT ALL for us not to get any sense that this is the case.
Whatever happens, and all of the political parties have been avoiding addressing this rather massive elephant in the corner of the room during the election campaign, all of them are going to have to make some pretty painful cuts in certain areas to address a massive national budget deficit. I would imagine that the average property buyer has been fairly aware of this for several months now so, when it happens after the election, it’s not going to be a huge surprise.
Whilst we might not have seen a dip in activity in the past few months, it is entirely possible that the election or re-election of any of the parties might have a positive effect on the property market and that activity levels might go up. That will of course depend on what they do when they come to, or remain in, office. And, since I’m a hugely hardened cynic, I suspect that what they actually do when in office might vary slightly from all of the words uttered in the lead-up to the general election, most of which phrases seem to start with ‘we believe in’ or ‘we would like to see’ and very few of which seem to start with ‘we will actually do…’.
Nationwide Reports 10% Rise in Property Prices, Year on Year – Is This Sustainable and Where Will House Prices Head in the Coming Months?
It was reported very recently, by The Nationwide, that property prices have risen, across the UK, by 10%, year-on-year in April 2010. It should be noted that these are year-on-year figures which only compare one month against the corresponding month in the previous year so they’re not exactly long term forecasts. However, they do point to a healthier market than has been seen in the past couple of years.
Commentators pointed out that the rate of house price growth is, however, slowing. These are probably more useful statistics to look at as they point to what might happen in the future.
For what it is worth, I don’t see property prices crashing back down. I could be wrong and please feel free to email me in a year’s time and point this out to me if I am! I think we’ll have a confusing couple of years where property owners are seeing statistics telling them that property prices are going up. Many sellers will then wonder why these price increases are not affecting their properties. Why is this?
Because, as we have seen in the past few months, certain sectors of the market will be more active than others. Until mortgage conditions become more favourable, we won’t see much more activity in the ‘lower end’ of the market. The very active areas will be the ‘higher end’ of the market: family homes and larger premium properties in traditionally desirable areas. This will naturally skew the statistics and create an impression that house prices are rising if you look at the average selling prices of all properties that are sold.
The only conclusion to be drawn is actually that very little has changed in the past few months. People haven’t stopped buying properties because of the impending General Election. Mortgage approvals haven’t really gone up enough to make any difference to the property market. The Stamp Duty exemption for First Time Buyers up to £250,000 hasn’t really had any discernible effect on the market north of the border (average first time buyers don’t buy properties THAT expensive). Prime properties and family homes continue to be in high demand and are still selling relatively quickly. One bedroom flats continue to be in relatively low demand and will only sell if the price is right.
And what’s the largest non-change in this period? Politicians still won’t answer the single largest question of our time: how are we actually going to reduce the national budget deficit AFTER the general election? Since none of the major political parties have actually addressed this question in full (according to the Institute of Fiscal Studies) we can’t actually know how the different political parties will actually cut the entire deficit. Therefore, we will have to wait until AFTER the election to find out the answer to this question. And until we have a clear answer to this question, we cannot have a clear picture of exactly how such budget cuts will affect the property market.
At that point, only one thing will happen with certainty: whatever the government decides to do (whatever political colours they may be wearing at that point), the other parties will then come out and reveal the policies that they will claim they had formed PRIOR to the election (but just neglected to tell us) and which, of course, will be the opposite of any unpopular policies that the government at that time introduces.
Meantime, I’m off to watch the final leaders’ debate tonight and to scream loudly, with a few friends, ‘answer the question!’ at the telly. Enjoy the rest of the campaign!