What the forthcoming election will mean for the property market

Last year saw a remarkable turnaround in the UK property market and although there will be further challenges in 2010, most notably the general election; a recovery is underway, according to a new report.

This year has got off to a very satisfactory start and sentiment in the property market has improved as mortgage finance, while still restricted, continues to cheapen.

The prime property market remains buoyant, with a deficit of available properties and currency weakness attracting a steady stream of overseas buyers. With prices showing some recovery, we hope to see more properties coming to market over the course of the year, especially family houses where there is still a significant shortage.

In the lettings sector a limited availability in stock reflects a return to historic levels, without significant upwards price pressure, the report shows. Corporate rentals are slowly returning, although they still remain well below the levels seen in 2007. The report predicts that the rental market should continue to firm up, with shorter void periods and limited upward price pressure.
 
The big unknown of 2010 is the general election, with a hung parliament now being tipped as a relatively likely possibility, which could herald a period of uncertainty in the property market. But the report concludes that it is easy to over estimate the impact this may have on the housing market and the economy generally.
   
Although general elections do not usually have much sway on the property market in the UK, this year’s election could have a greater impact, particularly on mainstream real estate, than past elections because of where we are in the housing cycle.
  
Because the property market is already in a state of low turnover and is only partially functioning due to the global financial crisis, it is perhaps more vulnerable to the slightest political changes, according to a residential research director at Savills.
 
‘We have a partially functioning market where recent price growth has been driven by cash and equity rich buyers chasing low stock levels. With continued constraints on mortgage lending, the market is heavily dependent on sentiment amongst a certain class of buyer, particularly against the background of continued economic uncertainty,’ he explained.
 
‘We expect to see these low transaction levels continue up to the election and through the immediate aftermath as political uncertainty makes buyers and sellers pause for thought. In itself this could cause volatility in price movements, with possibly more short term downward pressure on prices in the mainstream market than we have seen in the past twelve months,’ he added.
 
‘Without doubt, and probably regardless of which party wins, an outright majority would be the best outcome for the housing market in 2010, and possibly through to 2012, the year we have penciled in as the start of a more sustained housing market recovery.’

Extracts taken from Property Wire and BBC live