Rebound! Housing market strengthens despite election uncertainty

There’s been a modest rebound in house price growth according to new figures from the Nationwide.

The lender says UK house prices rose 0.4% month on month in May, and annual growth rate picked up to 1.3%, from 0.6% in April.

Commenting on the figures, Robert Gardner, Nationwide's Chief Economist, says: “UK house prices increased by 0.4% in May, after taking account of seasonal effects. This resulted in a slight pickup in the annual rate of house price growth to 1.3% in April, from 0.6% the previous month.

“The market appears to be showing signs of resilience in the face of ongoing affordability pressures following the rise in longer term interest rates in recent months. Consumer confidence has improved noticeably over the last few months (see chart below), supported by solid wage gains and lower inflation.

“With the recent announcement that the UK general election will take place on 4 July, we have analysed house price movements in the months around previous elections, and also the 2016 EU referendum.

“As the chart below illustrates, past general elections do not appear to have generated volatility in house prices or resulted in a significant change in house price trends.

“In the chart we have indexed average house prices so they equal 100 in the election months in each of the years shown. We can then compare house price movements in the six months leading up to each election (t-6 to t-1) and following each vote (t+1 to t+6).

“On the whole, prevailing trends have been maintained just before, during and after UK general elections. Broader economic trends appear to dominate any immediate election-related impacts.

“We also examined how activity, in particular house purchase mortgage approvals, responded to past UK elections (see chart below). Here the picture is less clear but again there doesn’t seem to be any tangible impact in the three months either side of a general election.

“2019 is a notable exception, but this was due to the impact of the pandemic, with the initial lockdown in 2020 suppressing housing market activity. Activity subsequently bounced back once restrictions began to be lifted.

“It appears that housing market trends have not traditionally been impacted around the time of general elections. Rightly or wrongly, for most homebuyers, elections are not foremost in their minds while buying or selling property.”