Rainbow Realty Deal September 2013

“Change is the law of life. And those who look only to the past or present are certain to miss the future.”
John F. Kennedy

With only days left before the Federal Election, this month’s article looks at how housing values and sales volumes are affected in the lead-up to an election.

Cameron Kusher from Real Property Data Research has looked at the past five elections and analysed the performance of the housing market over the 12 months prior to the election in terms of capital city home value growth and national house and unit sales.

It is important to remember that the housing market is somewhat seasonal so the time of year the election is held is likely to have an impact; however, the 12 months’ worth of data does show the trend in the lead-up to an election.

The five most recent federal elections have been: 3 October 1998 (Coalition win), 10 November 2001 (Coalition win), 9 October 2004 (Coalition win), 24 November 2007 (Labor win) and 21 August 2010 (hung parliament but Labor took power). Looking specifically at the change in home values over the 12 months leading up to the federal elections, in each instance home values have increased. Over the 12 months to July 2013, capital city home values have risen by 4.9% so it looks almost certain that home values will increase over the year leading up to the September federal election.

The strongest annual increase in home values leading up to a federal election was in 2001, with values rising by 18.8% followed by the 2007 election where values rose by 13.2%. Over both of these periods the housing market was already in an upswing. On the other hand, values rose by 5.7% in the lead-up to the 1998 election, 2.8% in 2004 and 8.8% in 2010.

If you were to look at the change over the year in national home sales, the results are somewhat different building up to election. The most up-to-date sales information indicates that sales to May 2013 were 19.0% higher and with interest rates moving lower more recently; sales appear likely to pick-up further in the lead-up to the September election.

The number of home sales was higher over the year leading up to the 2001 and the 2007 elections. In 2001, sales volumes increased by 44.6% over the year and in 2007 they rose by 33.3%. In 1998, sales volumes fell by -2.6% over the year, in 2004 they fell by -11.0% and in 2010 they fell by -32.4%. (Which was arguably more as a result of the effects of the GFC than the pending election).

So over the past five election campaigns home values have risen while in only two of the past five campaigns have home values and sales volumes increased. Values and volumes rose in 2001 when the Coalition was returned for a second term and they also both rose in 2007 when Labor took office from John Howard.

How much the trends outlined above can be attributed to an election is debateable. Arguably the momentum of the market cycle is influencing the trends just as much as the election. Regardless of the cause, it looks like federal elections do not have a slowdown effect on housing market conditions. (Reference: Cameron Kusher, RP Data, August 2013).

Mr Kusher also believes (and we agree) that the incumbent political party would generally be quite happy to see sales volumes and home values rising in the lead-up to an election. For most people the family home is the single largest investment and rightly or wrongly, Australians tend to feel more confident and happy when home values are rising. From a political stand point, around 70% of households either own their home outright or have a mortgage and rising home values is likely to be a much more palatable message to the electorate than one where the value of their largest asset is falling. It also suggests that housing affordability will remain only a minor election issue given such a large proportion of the population either own or are paying off their own home and many also have investment properties.

On a local note, there has definitely been an increase in sales enquiry and sales transactions over the past 3 – 4 months; with approximately one sale per week for the past 18 weeks, leading us to believe that we have seen the ‘worst of it’ and confidence has returned to the market.