Elections rarely have an impact on New Zealand’s housing market, according to new research, but 2023’s poll could prove to be an outlier.
Analysis of sales activity in the three months prior to and three months after each of the last seven general elections found little change in all but one election year.
The study’s author, Chris Dibble, director of strategic advisory at Colliers, found that, in general, the main parties’ policies haven’t differed sufficiently to change the course of the housing market.
Activity before and after the polls has mostly been driven by regulation and other non-campaign-related factors, including lockdowns, the loan to value ratio (LVR) rules, interest rates, access to finance, migration, and the availability of housing.
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The exception was the 2014 election, when the Labour Party’s plans to introduce a capital gains tax and foreign buyer ban spooked the market. “Labour was promoting capital gains tax and National wasn’t,” Dibble said. “That was what stuck out from our analysis of that election.”
Dibble raised the possibility of this year’s election campaign having more of similar influence on the market. “When we look at 2023, [will there be] a divergence in the two major parties’ housing policies? Potentially there could be.”
He said that while Prime Minister Chris Hipkins had vowed to honour his predecessor’s commitment of no capital gains tax for the rest of this term, he had not indicated what a future Labour government might do.
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Dibble said questions around Labour’s recently introduced property tax laws, including the extension of the bright-line test to 10 years and the removal of interest deductibility as an expense for investors, could also have an impact.
National housing spokesperson Chris Bishop says although the party’s full housing policy is yet to be released, the party is committed to bringing back interest deductibility for rentals and also bringing the bright-line test back down to two years.
Dibble said: “If those [policies] were reversed, we’re likely to see a potential uptick in investment inquiry.”
Separate analysis by OneRoof’s data partner, Valocity, reached similar conclusions as the Colliers research, Valocity head of valuations James Wilson said. “The key thing is that in New Zealand, property values haven't really been affected by elections. That's ultimately because there is a whole range of other variables that impact the market.”
John Key celebrates National's election victory in 2014. The research found that the 2014 election had an impact on the housing market. Photo / Getty Images
Wilson said: “Owner-occupiers tends to be less affected by election cycles than investors. They tend to buy or sell regardless of the results because most are making long-term decisions.”
He said it would unwise to tie current market behaviour by investors to the upcoming election, “but fast-forward a few months and you might see investors sit back and see what comes out of the October 14 election before they make their next investment decision”.
“They just might hold fire for a bit longer than other buyers, such as first-time buyers or owner-occupiers.”
Wilson agrees that the tax changes enacted in 2021 will come under scrutiny. “Tax deductibility will be a hot topic for investors,” he said.
Wilson said the influence of elections on the housing market had waned over the last 40 years thanks to increasing demand for property.
Chris Farhi, head of insights at Bayleys, said anecdotal evidence about the effect of elections was mixed. “Some agents expect a slow-down in decision-making in the months before an election, others have not observed any substantial impact,” he said.
Valocity head of valuations James Wilson: "Tax deductibility will be a hot topic for investors." Photo / Fiona Goodall
Farhi said external factors this year might have more of an influence on the market. “We’re now seeing some sentiment that inflation and long-term interest rates are peaking. Our working theory is that this will bring an increase in sales activity at the back half of this year.”
He said that any increased activity in the second half of the year, which might be perceived to be driven by the election, could come from an easing of interest rates.
He pointed out that this election presented less downside risk for property owners than some previous elections. “If there is a change in government, we’ll likely see changes that are more investor-friendly. If there is no change in government, we’ll likely see minimal change in policies in the short-term.
“So this election presents either minimal change or positive change for investors, rather than a clear downside risk. Given less downside risk, investors will be less likely to hold off on decisions prior to the election.”
