UK house prices are showing signs of recovery despite the fast pace of political events in the country, including the impending General Election on the 12th December. The most recent house price index from Nationwide reveals that the rate of house price growth increased to 0.5 per cent in November, up from 0.2 per cent in October. This is the highest rate of house price growth since April, yet buyer confidence remains low.
It is understandable that, in light of recent political events and the unpredictable outcome of the election, first-time buyers in particular are anxious and would rather wait it out than take the plunge and take out a mortgage now. But is this anxiety justified by a historical correlation between house price fluctuations and elections?
The dataexamining the behaviour of house prices around previous UK elections (taking three months either side as the time period) is clear: elections do not have a significant impact on house prices either way. There is some indication that election results may slightly affect the rate of mortgage approvals (depending on how confident mortgage lenders are feeling following the election result), but again, the rate of change isn't significant enough to become a phenomenon that recurs during every election.
Economists at Nationwide comment, 'It appears that housing market trends have not traditionally been impacted around the time of general elections. Rightly or wrongly, for most home buyers, elections are not foremost in their minds while buying or selling their home.'
What prospective buyers do need to bear in mind is the potential for house prices to keep growing for reasons unrelated to the political situation in the country. Urban regeneration and investment in northern England, for example, are likely to see house prices increase substantially in the region over the next five years. London will inevitably continue to see house price growth thanks to fresh wave of foreign investment and the completion of transport projects such as Crossrail.
The slowing down of the pace of house growth, if only for the time being, should be welcomed by first-time buyers as an opportunity to secure a home at a time when we are seeing a relatively stable economy and steady wage growth. Our advice, as ever, is to just go for it if you are in a position to do so.
Find out more about buying a house in our guide.