After a strong run for property prices over the last few years, the slowdown in overall market activity settling in looks set to be further hampered by an uncertainty many associate with the looming general election.
But is uncertainty and a lack of buyer activity pre-election a reality? Do property sales soften up to, and immediately after the new Government is announced?
Scheduled for September 23, the election 2017 has certainly added a degree of ambiguity to the residential housing landscape, which over recent months has already experienced a significant moderation in the wake of tightened lending criteria, creeping interest rates and capacity constraints.
As there’s no certain measure for events which haven’t yet occurred, history is the best barometer for what to expect over the coming months.
Thus, Bayleys Research has sought to assess the degree of impact that the Election 2017 will have on our national residential housing market.
The research, conducted in conjunction with sales data released by the Real Estate Institute of New Zealand (REINZ) investigated sales trends surrounding the dates of the last five elections in 2002, 2005, 2008, 2011 and most recently 2014.
While there are several variables to consider – in 2008 for instance the election fell in November, with the final quarter of the year marking a particularly low point in sales activity post Global Financial Crisis (GFC), the research shows that sales activity during the election has varied little when compared to sale results from the previous quarter.
“We have only seen a very small (if at all) shift in buyer behavior in the lead up to previous elections,” says Bayleys manager of research Ian Little.
“The results show that property sales at the time of the last five elections increased when compared to results from the previous quarter.
“Similarly, the data showed that immediately after the election results have been revealed in four of the five past elections, sale numbers lifted – most significantly in 2008 and 2014.
“While the analysis illustrates a lift in sales activity immediately following an election, the data shows no concrete consistency.
“It does somewhat dispel the belief that activity across the market takes a dive in the months building up to an election,” Little says.
The analysis shows that it is also interesting to look at buyer behavior from the varying buyer classes.
“The majority of those choosing a ‘wait-and-see’ approach around election dates are property investors because they’re the buyers more likely to be impacted by changes in Government policy,” says Bayleys national residential and auction manager Daniel Coulson.
“The decision by owner-occupiers looking to enter the market is usually driven by personal circumstance – a marriage, expanding family or change in job.”
Mr Little agrees, saying that investor behavior is more likely influenced by an upcoming election if the housing policies of the major parties vary significantly.
“This explains the 23.6 percent lift in sales activity following the 2014 general election, where a number of Labour Party policies - including a 15 percent capital gains tax and restrictions for non-residents were closely monitored by residential property investors.
“In contrast, the National Party policies were viewed more favourably by the investment sector.
“While it was in all likelihood, a number of factors which contributed to the spike in sales activity post the 2014 election, there was little uncertainty regarding the National Party’s stance on housing – giving both buyers and sellers the confidence to return to the market almost instantaneously,” Little says.
When pondering the impact of the upcoming general election, one must acknowledge that market conditions have over recent months, softened. Further tightening of lending restrictions by the Reserve Bank of New Zealand (RBNZ), coupled with a more risk-adverse approach to mortgage lending has seen sales activity fall by between 20 and 30 percent across the country.
With this in mind, it pays to look at the buyer for the property before considering a pre-election sale.
“There is no evidence to suggest that those selling owner-occupied stock are better to postpone listing their property prior to the election – if anything, the evidence weighs in favour of a pre-election sale.”
“On the other hand, if the potential purchaser is more likely an investor – delaying the release of a property to market (until immediately after the new Government has been formed) shows the possibility of achieving a more favourable result,” Mr Coulson concludes.
For more information on how the general election may impact the residential property market go to bayleys.co.nz/electionimpact