How elections can influence the property market

With an election drawing closer and only partial policy announcements to date coming from the major parties, Colliers International’s latest monthly research report, released today, looks at sales activity and confidence surveys coinciding with the past six elections since 2000 to showcase what impacts the campaign could have upon the property sector.

Ian Little, Associate Director of Research at Colliers, says the analysis found residential sales activity has generally varied little from prior trends, except when a significant government property-related policy was in the limelight.

“In five election campaigns out of the six since 2000 there has been little influence on sales activity. However, the one exception was the 2014 election campaign.

“In 2014, Labour promoted a Capital Gains Tax and restrictions on the ability of

How elections can change the property sector

The 2020 general election could have a major influence on the market, according to a Colliers analysis of election impacts over the past two decades overseas entities to purer-occupiers. rates, access to finance, chase residential property. By way of example, total migration and the availabili

“These policies contrastmortgage lending to investy of housing. ed with National’s, which tors increased from $1.167 “It is interesting to note were viewed as supporting billion in August 2014, a that the recent removal the status quo. This divermonth prior to the election, of LVR restrictions and a gence saw a slowing of to $1.421 billion in October, further reduction in intersales prior to the election an increase of 21 per cent. est rates have resulted in date and a surge following The uplift for first home investors and first home it when the emergence buyers and other types of buyers lifting their share of of a National government owner-occupiers was just mortgage lending, despite removed uncertainty in 8.6 per cent. the current economic backoutcomes.” Market dynamics during drop,” Little says.

Little says the prospect other campaigns post-2000 “Looking ahead to the of potential changes to have been influenced more 2020 election, the lack of housing policy will, in most significantly by regulatory, ‘restrictive’ housing policies cases, influence the resieconomic, financial and deand regulatory changes that dential investor sector to a mographic drivers such as have been announced, to greater extent than ownchanges to LVRs, interest date lead us to believe that

we can expect little influence from Election 2020 on residential market activity.

“This suggests that economic, financial and demographic drivers will be key considerations for residential sales activity over the remainder of 2020.

“As of early August, lending and sales activity were extremely buoyant, defying many economic forecasts of more subdued activity.”

Adrian Goh, Research Analyst at Colliers, says commercial and industrial property sales activity since 2000 has shown little divergence in purchasing trends when analysed against election campaign periods.

“This is potentially a result of the sectors being less influenced by policy outcomes than the residential sector.

“However, when analysing sentiment, commercial property investors seem to indicate there is some influence.”

Colliers’ commercial and industrial property investor confidence surveys increased from a net positive 4.4 per cent (optimists minus pessimists) in the December quarter of 2011 to 15.6 per cent in the March quarter of 2012.

Following the 2014 election, the September quarter figure of a net positive 25.1 per cent increased to a net positive 30.6 per cent in the December quarter.

“This indicates that commercial and industrial investors hold back slightly before elections but are quick to resume their pre-election activity levels soon after,” says Goh.

“One slight exception to this was following the 2017

election. The lift in confidence was not as immediate, with confidence falling in the December quarter before lifting in March.

“This result may have been influenced by the lengthy coalition negotiations which followed the September election, with the make-up of the government only finalised in October 2017.

“There was also some discussion around business confidence surveys under Labour governments typically being lower than under National government.”

Goh says this suggests the influence of election campaigns on commercial property investment is typically secondary to the general economic and financial backdrop.

“In 2008 for example, the November election result did little to lift confidence as businesses grappled with the fallout from the Global Financial Crisis.

“While we are currently likely to be in a technical recession and unemployment is most likely to double before reducing again, current investor activity indicates these are not a key driver of current sales activity.

“While sales volumes are lower, prices are holding up. Instead, low interest rates are driving investor sentiment with the search for prime assets with strong tenant-covenants rising above pre-Covid levels.

“Higher volumes and prices paid for land acquisitions have also been a trend, indicating investors are looking past the potential short-term disruption and eyeing potential long-term gains.”