Tuesday, 30 May 2017

What will the General Election do to 6,180 Falmouth Home Owners?

There are 9895 households in Falmouth. Of these 3,585 homes are owned without a mortgage and 2,595 homes have a mortgage on them.

Many homeowners have made contact asking what the General Election will do to the Falmouth property market?  The best way to tell the future is to look at the past.

 I have looked over the last five general elections and analysed in detail what happened to the property market on the lead up to and after each one. Some very interesting information came to light.

 Of the last five general elections (1997, 2001, 2005, 2010 and 2015), the two elections that weren’t certain were the last two (2010 with the coalition and 2015 with the largely unexpected Tory majority).

Therefore, I wanted to compare what happened in 1997, 2001 and 2005 when Tony Blair was almost guaranteed to be elected/re-elected against the last more close-run elections of 2010 and 2015 ... in terms of the number of houses sold and the prices achieved.

Look at the first graph below comparing the number of properties sold and the dates of the general elections


It is clear, looking at the number of monthly transactions (the blue line), that there is a certain rhythm or seasonality to the housing market. That rhythm/seasonality has not changed since 1995 (seasonality meaning the periodic fluctuations that occur regularly based on a season) For instance you can see how the number of properties sold dips around Christmas, rises in Spring and Summer and drops again at the end of the year.

To remove that seasonality, I have introduced the red line. The red line is a 12 month ‘moving average’ trend line which enables us to look at the ‘de-seasonalised’ housing transaction numbers.

The yellow arrows denote the times of the general elections.

It is clear to see that after the 1997, 2001 and 2005 elections, there was significant uplift in the number of households sold, whilst in 2010 and 2015, there was slight drop in house transactions (i.e. number of properties sold).

In plain English, it seems to follow that a landslide or clear election result, tends to translate to a more confident market and one where properties sell quicker and in greater volume. Anything less than a clear victory appears to result in a less confident post-election sales environment.

Next, I wanted to consider what happened to property prices. In the graph below, I have used that same 12-month average, housing transactions numbers (in red) and yellow arrows for the dates of the general elections but this time compared that to what happened to property values (pink line).


There is no discernible pattern of increasing house prices in the 12 months following an election. In 1997 and 2001 they did. In 2005 they plateaued. In 2010 they fell away. In 2017 they raced away. The wider economics are more at play perhaps than the politics.

What one can read into both graphs is that while an election might help you sell (more transactions taking place), it does not necessarily mean you will sell for more. 

So finally, what does this mean for the landlords of the 2,054 private rented properties in Falmouth?

Well, as I have discussed in previous articles (and just as relevant for homeowners as well) property value growth in Falmouth will be a little more subdued in the next few years for reasons other than the general election.

The growth of rents has taken a very slight hit in the last few months as there has been a slight over supply of some types of rental property in Falmouth. Much of this is due to the seasonal nature of the rental market in Falmouth particularly between November and the beginning of March. During those times Falmouth landlords need to be realistic with their market rents.  Once the winter let season finishes and holidaymakers arrive for Easter those displaced tenants fuel the demand and upward rental cycle until the reverse happens at the end of the season. Twas ever thus here in this part of Cornwall

In the long term, as the younger generation still choose to rent rather than buy ... the prospects, even with the changes in taxation, mean investing in buy-to-let still looks a good bet. Look at the pink line since 1995. At the risk of sounding like a broken record.. where else are you going to place your money – stock, shares, savings accounts or bricks and mortar? Naturally you can gauge our response to that as Landlords ourselves!

If you want to read more about the Falmouth property market – then please visit the Falmouth Property Guru for informed comment and articles not about us or our business but issues and items that we believe are relevant for our fellow Landlords.

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