Property Institute finds link between elections and property sales

Thursday, 31 August 2017

Elections can have a dampening effect on house sales, a new report says.

Elections tend to dampen the residential property market, based on data collated by the Property Institute and Valocity.

Property Institute chief executive Ashley Church said the report showed a dip in property sales in the months leading up to the elections in 2011 and 2014 before the market quickly recovered.

Church said a possible difference this time was the introduction of loan to value ratios - essentially rationing credit, he said.

'Softening in the market began last September after the second round of LVR restrictions so it's possible it may not bounce back as quickly after elections this time.'

* House sales numbers in Auckland hit level not seen since 2008**

The report shows that between the announced date of the election in March 2014, and the election in September that year, there was an average drop in sales of 23 per cent a month in Auckland followed by a recovery to previous levels afterwards.

The market was less heated in the lead up to the 2011 election and the decline was less dramatic, compared with the 2014 boom year.

'In the 12 months between July 2016 and July 2017 sales volumes across the country were down by 55.4 per cent or 4229 properties but the majority of that drop has taken place since the election date was announced in February of this year'.

Church said although LVR restrictions were having an effect, analysis of recent mortgage lending suggested they may not be as significant as initially thought.

First home buyers accounted for just under 30 per cent of all new mortgages across the country, and mortgages to investors have remained steady at about 18 per cent of all new mortgages for several months.

Refinancing accounted for 20 per cent of mortgages.

Church said the underlying dynamic of the Auckland market was for a continued shortage of housing, suggesting it might be too early to declare the boom was over.

He said he had no evidence about the effect of the election on housing consents but it seemed logical they might be affected too.

'General elections also traditionally compound any annual winter slow-down in the housing market due to uncertainty caused by potential policy changes so it's likely this is also a factor in the subdued sales activity,' he said.

Real Estate Institute chief executive Bindi Norwell said buyers often took a wait-and-see approach because of the possible effect of different policies on tax or other issues affecting investment such as house warrants of fitness.