Who would you trust with the biggest investment you’ll ever make; the Labour party or the Conservatives? A year on from Liz Truss’s mini-budget, with mortgage interest rates of 6.5 per cent biting into incomes, it feels as though the connection between politics and the housing market has never been stronger.


22nd September 2023


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How will the general election affect house prices?

What impact will the vote have on buyers and sellers? And which party really is the homeowner’s friend?

By Melissa York

Who would you trust with the biggest investment you’ll ever make; the Labour party or the Conservatives? A year on from Liz Truss’s mini-budget, with mortgage interest rates of 6.5 per cent biting into incomes, it feels as though the connection between politics and the housing market has never been stronger.

The shadow of last September’s fiscal fiasco has been instrumental in cooling down 2021’s overheated property market. The average asking price is down 0.4 per cent over the year, Rightmove reports, the biggest drop since March 2019. More than a third of properties listed for sale on the property portal have been reduced in price, by £22,700 on average.

And there’s more upheaval on the way. The next UK general election must be held by January 2025. Pundits predict the prime minister Rishi Sunak will wait for inflation to settle before going to the polls in the autumn 2024.

YouGov polling suggests that over half of British adults think there will be a Labour victory, meaning a change of government is a real prospect.

One ill omen for the Conservatives is falling house prices. A report by the buying agency Middleton Advisors, compiled by the housing analyst Yolande Barnes, places 50 years of housing data in political context.

It found that falling house prices were a feature in two out of three regime changes since 1975, whereas there has been no change in the governing political party during a period of rising house prices since 1979.

Kate Eales, the head of regional residential agency at Strutt & Parker, says: “Over the last 40 years, the property market has become more political with each election. From right to buy to stamp duty reform and a mansion tax, buyers and sellers typically become more cautious around an election in anticipation of change and the uncertainty that may bring.”

Which party is the homeowner’s friend?

Real house price growth in the last five decades has risen the most under Labour governments, while four out of the five governments that presided over falling house prices were Conservative.

Middleton Advisors’ analysis also shows that the Labour prime minister Tony Blair oversaw the period of greatest growth in the housing market, with prices increasing by 9 per cent per year on average during his premiership. Between June 2001 and May 2005, when Blair was prime minister, house prices increased by almost £48 a day. Under John Major’s Conservative government, which started during a global recession in 1990, house prices increased by just £3 a day.

This may come as a surprise to market watchers as the Conservative party has traditionally styled itself as the “party of homeownership” in opposition to the Labour party, which is generally more in favour of taxing wealth and assets rather than income.

The property consultancy JLL dug into its data over the last ten years and found that most of the Blair price growth happened in the early days of New Labour when the economy was buoyant.

This period also coincided with the buy-to-let boom between 2000 and 2007, when UK Finance figures show that the number of buy-to-let mortgages obtained increased from 48,400 to 346,000.

So, is it the economy, stupid?

The numbers suggest that the Labour party may have been lucky enough to preside over more periods of economic prosperity than the Conservatives and it is this that has played a bigger role in boosting house prices than its policies.

However, policy undoubtedly influences economic conditions. Real house prices only declined by 5 per cent under Labour’s Gordon Brown, who presided over the worst of the global financial crisis between June 2007 and May 2010, according to Barnes’s report.

In comparison, real house prices have fallen almost 13 per cent during Rishi Sunak’s premiership, who has had to deal with difficult economic circumstances, namely high inflation following a global pandemic.

Introducing housing policies before an election is rarely enough to boost house prices. Government housing policy needs time to “bed in”, Lucian Cook, head of residential research at Savills estate agency, says “to give [politicians] the opportunity to campaign on the back of its track record”.

A good example of this is the introduction of help to buy in 2013, followed by the stamp duty reform in 2014, which allowed the Conservative party to put homeownership at the forefront of its 2015 election campaign.

Do elections move housing markets?

There is little evidence that elections themselves move housing markets (house prices) or affect the number of transactions (sales).

Cook says: “For a general election to have an impact on the housing market the outcome would need to raise the possibility of a material change in the macroeconomic backdrop, direct housing policy or property taxation. Often that isn’t the case, so there isn’t consistent evidence of a tangible election impact on the market.”

Estate agents usually report a market slowdown in the immediate run-up to an election though as buyers and sellers adopt a “wait and see” approach.

Edward Heaton, the buying agent, expects a slowdown of as much as six months before a general election and the most extreme example of this was in the run-up to the 2019 poll.

He says: “There was near panic in some quarters about the prospect of a [Jeremy] Corbyn-[led] government. I know of several people who relocated overseas out of fear of what impact it might have had on their wealth.”

The threat of a higher regulatory or tax regime can spook markets, as proposals for a mansion tax did in early 2010. But this only tends to affect the top end of the market, where buyers are most impacted by wealth taxes.

For the same reason, second-home sales tend to slow down too, Josephine Ashby, from John Bray Estates, says. When elections are held in May, she says the fear of change “tends to take the wind out of the usual spring market”.

The majority of the market, however, appears to be less buffeted by ballots. Across the four elections since 2010, there were just 1 per cent more sales in the three months following election month compared with the three months prior, JLL data shows.

How could the upcoming election change the housing market?

In the midst of a cost of living crisis, housing may be a bigger issue in the next election than it has been in recent years.

Each party will need to demonstrate that it has the ability to bring inflation under control, which has a direct impact on the finances of homeowners and landlords.

The manifestos will also need to have something to offer private renters “who have become more important to securing potential swing seats”, Cook says.

The delay of the second reading of the Renters Reform Bill, which has reportedly been held up by vested interests in the Conservative whip’s office, is not likely to endear the Conservatives to younger or less affluent voters.

However, it could win the Tories the landlord vote, as could ditching new energy efficiency requirements — as Sunak was reportedly considering this week — which are set to cost private landlords £9,260 per property on average.

Higher mortgage rates have priced out many first-time buyers without access to the Bank of Mum and Dad. While the Conservatives have introduced discount schemes such as First Homes and 95 per cent mortgage loan guarantees, these have not been enough to counter higher interest rates and they do not appear to have a successor to Help to Buy in the works.

● How mortgage valuations are driving down house prices

The Labour party has a homeownership target of 70 per cent (it currently stands at 64 per cent) and it is looking at a state-backed mortgage guarantee for people who can afford mortgage repayments but cannot save for a deposit.

Help to Buy has been accused of artificially pushing up new-build house prices and any demand-boosting policy is likely to be scrutinised for its ability to distort the housing market.

Marcus Dixon, director of residential research at JLL, says: “Overall the biggest spikes in activity have been around changes in tax rules (such as stamp duty land tax) rather than the result of an election.”

Property pundits seem satisfied by the assurances of the shadow chancellor Rachel Reeves, who recently ruled out wealth taxes on assets. However, there has been talk around raising council tax for second homes and creating a national register; giving first-time buyers priority to purchase new-builds; “ending the worst excesses and abuse of leasehold tenures”; and raising stamp duty for foreign property-buyers.

Perhaps the boldest policy is Labour’s pledge to scrap non-domiciled tax status, which allows people to live in the UK without paying tax on their global earnings. There are about 68,000 such individuals, mainly in London.

“If members of this small but economically significant group decided to vote with their feet and exit the UK, it could have a disproportionate impact on the very top end of the housing market,” Camilla Dell, the buying agent, says.

All of these policies are likely to affect the prime market and investors the most, rather than mainstream buyers and sellers, but critics say it could impact supply at a time when the housing shortage is acute.

This year, the Conservatives ditched their annual house-building target of 300,000 homes, but Labour plans to reinstate mandatory targets for local authorities.

Cook concludes: “While that is unlikely to significantly affect the market in the run up to the election, it probably has the greatest long-term implications for house price growth and activity levels, provided it results in concrete policies rather than arbitrary house building targets without any real plan of how to achieve them over a parliamentary term.”

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