General elections impact housing market

A good turnout in general elections cools the property market, according to estate agency Your Move, which has analysed the number of property transactions completed during periods containing a general election, going back from the present day to 1979…

Your Move found that when voter turnout increases, the property market cools. For instance, in the 1987 election, when turnout was a healthy 75.3 per cent, transactions fell 3.4 per cent in the three months of the election, compared the three months before.

In 1992 when there was an even bigger 77.7 per cent turnout, transactions fell 2.4 per cent.  But in the 2005 election where there was a turnout of only 61.4 per cent, there was a five per cent increase in the number of transactions.

Bookies expect 2010's turnout to exceed the poor participation of 2005 – offering odds of 1/5 on election turnout coming in higher than 2005's turnout of 61.4 per cent.  But the odds on turnout coming below 2005 levels are 3/1.

David Newnes, Managing Director of Your Move, said, "Important general elections with massive turnouts tend to mean a decline in housing transactions.  The more seriously the electorate takes an election the larger the scale of the disruption to the property market with tens of thousands of potential homebuyers or sellers distracted by the political process or waiting until it is over before entering the market.

"If the bookies are right and we see a high turnout in May, we will see a large dip in housing market activity.  It will put a huge dampener on the market."

Your Move also analysed the number of votes both the main parties received and found that when the Conservatives do well at the polls, increased activity in the housing market follows.

For instance, in 1979 the Conservative party received 13,697,923 votes, compared to 11,457,079 in October 1974.  And in the three months following the election, there was an 8.6per cent surge in activity. 

But in 1997, the Conservative vote dwindled from 14,093,007 (in 1992) to 9,600,943 votes.  Housing transactions shrank two per cent in the following three months.

Relationship between change in Conservative vote and change in property transactions

Mr Newnes, the managing director of Your Move said, "Even if there's a huge turnout and the number of property transactions falls as a result, it's not all bad news for the housing market.  If the Conservative party increases its vote, the housing market should heat up in the three months following the election.  The number of seats and the eventual winner isn't important – that's all down to the lottery of first past the post voting – but the number of votes the Tories receive is all crucial.

"The increasing uncertainty of a Conservative victory is therefore potentially very bad news for the housing market.  With a high turnout and fewer Tory votes, the market is more likely to cool.  But if the Tories do well in May – or sooner – the bounce back should be even more pronounced than usual.  With the abolition of HIPs on the agenda, as well as the promise to increase the stamp duty threshold to £250,000, many potential buyers and sellers are waiting to see if the Tories get into power," he added.

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