Pre-election commentary from Lucian Cook, Director of Savills Residential Research.

An analysis of housing market activity in election years suggests that there is little statistical evidence to support the view that elections impact on the housing market. However, this year's election could have a greater impact, particularly on the mainstream, than past elections because of where we are in the housing cycle, says Lucian Cook, Residential Research Director at real estate adviser, Savills.

Mainstream Markets

"We are already in a very low turnover, partially functioning housing market, where recent price growth has been driven by cash and equity rich buyers chasing low stock levels," he says. "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.
"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"

"A hung parliament could lead buyers and sellers to remain cautious, which would suppress turnover levels and limit the prospects of price growth for longer.

"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 pencilled in as the start of a more sustained housing market recovery."

Prime Markets

In the prime markets the biggest risk will be to transaction levels which, unlike the mainstream market, have recovered relatively strongly in 2009 and the first part of 2010.

"Because of the weakness of sterling and the predominance of overseas buyers we expect pricing in the prime central London to be less exposed than the mainstream, while the more restrained recovery in prime regional values in 2009 insulates those markets from significant election-related price falls."

The cushion of higher levels of equity means that prime markets will be less sensitive to these factors, though the uncertainties surrounding taxation and future bonus payments will remain a concern for the foreseeable future.

"An uncertain market requires realism - an inflated guide price could result in a property sticking," says Cook. "For all but the most exceptional properties, sellers expecting to achieve a real price premium based on a perceived demand and supply imbalance could be disappointed. Buyers may have an opportunity to bid in a less fiercely competitive market but should not expect a rush of stock to the market."

Key Policy Issues:

Looking further ahead, it will be the extent to which the winning party is able address the key issues facing the property market and housebuilding industry that will determine the health of the mainstream residential market.