The hoardings are up (with a few to still to be updated), the door knockers are out in force, and our newsfeeds are flooded with stories detailing the latest resignations and policy announcements – election season is well and truly underway.
Policies and personalities aside, we’re often asked by clients how an upcoming election is likely to affect the property market, particularly sellers who ask whether it’s better to hold off until it’s over or simply to push on through with getting their property on to the market. The conventional wisdom is that markets do not respond well to uncertainty, and given recent developments, the election’s outcome is anything but certain. On the other hand, I’m yet to meet a buyer who has said that they’re going to forego a purchasing opportunity simply because they do not know the makeup of the next government.
While it’s easy for us to rely on anecdotal evidence and the vibe of the market, thankfully we have access to a considerable body of data from REINZ dating back to 1992. Back in 2014, real estate commentator Alistair Helm at Properazzi came up with a seasonable comparison. It uses the three preceding months leading up to each general election date and calculates the representation those months were of the total sales for that year. He then compares that % representation as a single figure against the normal for the same 3 months of the year based on a larger set of preceding data going back to 1992, as follows:
You could say that on average general elections depress property sales as 5 of the 8 elections caused property sales to decline as compared to normal. However there is no real consistency. The completely and significant opposing variance in the results for 1993 and 1996 are too significant to ignore.
Our analysis indicates that the majority of those choosing the ‘wait and see’ approach around election dates are property investors, as it is this section which is more likely to be impacted by changes in government policy.
The decision by owner occupiers looking to enter the market or move home tends to be driven by changes in personal circumstances, such as marriage, divorce, having a family, changing jobs, retiring etc. Once these circumstances are in play, the decision to purchase a new home is unlikely to be delayed solely because they coincide with the date of an election.
While there are signs that the Christchurch property market is cooling, this cannot be solely attributed to the election. The post-quake residential construction boom has boosted supply, while LVR restrictions are dampening demand, resulting in fairly modest price growth. The great thing is that a steady market empowers buyers and sellers to make informed decisions with confidence.