United Kingdom general elections and the impact on house prices

Abstract

Purpose The paper considers if house price movements in the United Kingdom (UK) can be linked to the political cycle as governments realise homeowners represent a large portion of the voter base and their voting decisions could be influenced by the magnitude and direction of house price changes. Specifically, this paper aims to investigate whether house prices behave differently before and after elections and under different political regimes. Design/methodology/approach The paper analyses quarterly house price data from 1960 to 2018 together with data on UK parliamentary elections for the same period. Descriptive statistics and significance tests are used to analyse the impact of the political cycle on house price movements in the UK. Findings While there is no evidence that house prices in the UK performed significantly differently under different political parties, the authors observed that house prices performed much better in the last year before an election compared to the first year after an election. On average, house prices increased by 5.3% per annum in the last year before an election compared to 1.3% per annum in the first year following an election. Research limitations/implications The study highlights significant variations in the performance of UK house prices around election times. Practical implications It is imperative that the political cycle is given adequate consideration when making residential property investment decisions. Social implications House buyers and investors in the residential property market could include the election timings as part of their decision-making process. Originality/value This paper represents a unique systematic examination of the influence of the political cycle on residential houses prices in the UK.