The prospect of a general election has minimal impact on the property market, according to a new report by CBRE, the leading commercial property and real estate services advisor.
The economy is the most significant driver of the commercial property market, with periods of strong economic growth coinciding with strong office take-up. By contrast the report shows that the correlation between property-related decisions and timing of general elections is negligible.
Miles Gibson, Head of UK Research, CBRE, said: “Conventional wisdom suggests that property markets slow as a general election approaches. Elections are uncertain, with the forthcoming election more uncertain than most. 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 behavior of the market, except where a detailed policy has already been proposed, such as the ‘mansion tax’.
“There is little, if any, evidence of UK general elections having any overall impact on property investors or occupiers, the pace of planning decisions, or house prices. This may be because Party manifesto policies on property are typically very general and, where they are specific, they take time to be implemented.”
The report demonstrates that:
Using data from the past 30 years, there is little evidence to suggest that general elections cause a slow-down in the Central London office investment market. In the last 30 years, there have been six general elections, all of which took place in the second quarter of the year. Second quarters tend to be quieter than the quarterly average. This holds true for non-general election years as well as general election years. However, there were year-on-year increases in investment transactions observed in five out of the six general election quarters in the period suggesting that the traditional weakness of second quarters is due to seasonal factors unrelated to the occurrence of general elections. The Central London investment market is very strong at present. With latent demand undoubtedly robust, the strength of the market in the first half of 2015 will be driven by the availability of stock rather than the election outcome.
Commercial occupiers in Central London seem undeterred by the forthcoming general election as evidenced by the 15m sq ft leased during 2014 – the highest annual total since 2006. Against a backdrop of robust economic and strong office-based employment growth, demand for office space will not diminish because of an impending election. This is already reflected in an above-average level of space under offer and a high level of active requirements, suggesting that 2015 will be yet another good year for leasing activity.
There is no discernible negative impact at a national level in the residential sector on either the mortgage market or house prices in the three months either side of a UK general election. House prices in May 2010 were higher than in April and lower than June as prices continued a growing trend.
However, as both Labour and Liberal Democrats have announced that they will introduce an annual tax on residential properties worth more than £2m, there could be a slight hiatus in the prime residential sector in the run up to this election. But this is unlikely to have a profound impact on the UK market as a whole, as only 2% of sales are worth over £2million.
There was no obvious slowdown in the speed of planning decisions in the run up to the 2010 general election. Even for major applications, often considered to be the most controversial, there was little change, with around 70% of decisions on these applications being made within the 13 week deadline for most of the three years before the general election.