Does politics have an effect on the property market?

Does politics have an effect on the property market?

Does the political climate in the UK have any real bearing on the property market? The simple answer is yes, obviously - with the Budget having a strong hand to play in the health of the sector year after year, and the government always teasing potential new taxes, changes in leadership can have a definite and noticeable impact on how well the sector performs.

Away from the feared mansion tax and constant desire for stamp duty changes, though, how does Westminster - as well as local authority rule - affect the market? According to Lehman Brothers' latest research, it can be quite a sizeable effect.

The company said, for example, that changes to taxation made by the coalition in recent times have made it possible for the market to be controlled, made sustainable, and steered away from the worrying possibility of a property bubble.

Property price rises in London alone have often been cited as being in danger of getting out of hand, but the analysis showed that political intervention has helped to cool this somewhat.

Lehman Brothers said that while prices rose in the capital's Prime Central sector by 0.8 per cent in March, in the past two years, rates of increase have been becoming more sustainable.

In the year to the end of March, property prices have risen by some 7.5 per cent, and while this is still a real positive for the market, it is slower than the 11.3 per cent and 8.1 per cent recorded in 2012 and 2013 respectively - showing that the market is starting to become more mature.

The report said that this is largely down to political intervention, with the government having extended taxes for properties bought through a private company model in its Budget 2014 announcement, a new rule which was looming for a while, and may have had some bearing on the attitude of buyers.

And then there is the looming general election, which will take place in May 2015. Despite being over a year away, the government is often loathe to make changes at times like now, for fear that voters might be alienated by any large shifts.

It may very well be the reason that leaders opted not to drastically change stamp duty in the budget, despite calls from many in the industry. 

The opposition can also have an impact, of course, and it is Labour's much feared mansion tax that has often made headlines, for good reason. 

Were the party to introduce the higher tax band for properties valued at over £2 million, it is expected that 80,000 properties across the UK would be subject to the new levy.

And with 95 per cent of these being located in London and the south-east, according to Zoopla, it's easy to see why sales of £2 million-plus homes may have cooled a little in recent months.

In truth, no matter which party is in power, the time left in any government and new regulations can have a very large effect on how the market performs, as well as how buyers act.