Do Kiwis buy more homes when National wins at the polls?

ANALYSIS: People always say the election impacts the property market.

But is it actually true?

I dug into property market data from the past nine elections and here’s what I found.

Yes, the data suggests that the brakes are on the housing market in the lead-up to a general election, with Kiwis buying 12% more properties after poll day compared to before.

Looking at 12 months before and 12 months after, we can see the pull back in buying activity tends to happen 10 months ahead the election, and that there is a massive upswing three months after, as Kiwis return to the housing market.

In the above data, I've excluded the 2020 election. That’s because we’d just come out of Covid, and the property market had an enormous boom, which probably doesn’t give us a clear view of the trend.

So, let’s look at another election to see how much impact it had on buyers and sellers.

Of all the elections I’ve seen, 2023's feels a lot like 2008's. Back then the country was in recession property prices had been falling rapidly. Sound familiar? So, what happened back then?

Twelve months out from the election, people were still buying lots of properties but as we got closer to the poll date, the market plunged as Kiwis stopped buying. After the election, however, there was an uptick in house sales, although some of this swing can be attributed the traditional market cycle.

The next question is: do property sales take off more when National wins an election?

That’s what the data says. When Labour was victorious in the polls, there was a slight increase in post-election property sales but the bump is a lot bigger when National wins.

While this graph contains 20 years of property market data, that’s only 10 elections - five won by Labour, five won by National - so, it’s a small sample size, which makes it difficult to draw firm conclusions.

Still, the trend is clear: when governments change, property sales are likely to likely increase, although more sales does not necessarily mean an immediate lift in prices, which tend to increase over time.

But what about house prices? Do they go up after an election?

So, if you look 12 months on either side of an election, you’re looking at two years. If you do this for nine elections, you’re crunching 18 years of house price data.

Property prices tend to go up by 6–7% a year, so, it’s no wonder that property prices are usually 6% lower before the election and 6% higher after the election (on average).

The most interesting point is that property prices (on average) don’t go down right before the election.

The average Joe doesn’t like buying properties before an election. They like to wait, just to “see what happens”. They feel nervous about making a large financial decision. That makes sense when the country’s direction is uncertain.

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But as the election result sinks in, people feel more confident as they get to grips with the new government and new policies, which means there is a natural bounce after the pull-back directly before the election.

One thing seems certain: it’ll be harder to buy a house after the election, as we've heard plenty of people say: “I’m going to wait to buy until after the election."

More people will enter the market once officials have counted the votes, which means the longer buyers wait till, the greater the competition they'll face.

- Andrew Nicol is managing partner at property investment company Opes Partners