Ed McKnight: Elections and their impact on the housing market

We all know about the direct effects of elections —financial, policy, crime— but they also seem to effect the housing market. 

Ed McKnight analysed 11 elections going back to 1993, and discovered a few patterns that appear in the housing market around that time. 

He joined Jack Tame to discuss his findings. 

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Episode Transcript

Speaker 1 (00:07):
You're listening to the Saturday Morning with Jack Team podcast
from News Talks at b when.

Speaker 2 (00:12):
We're talking personal finance with Ed McKnight from Opie's Partners.
Good morning, sir, Great to talk to you Jack. You
know what it feels like, elections come around faster and
faster and faster. Maybe that's just my job, but also
maybe that is just the experience of anyone who keeps
even a cursory eye on the housing market. Because it's funny.
In election year, it feels like the date itself and

(00:33):
the uncertainty that comes with elections looms over the property market.

Speaker 3 (00:38):
Well, that's exactly right, and in fact, so many things
routinely impact the property market and we can see that.
So what I've done is analyze the last eleven MMP
elections going back to nineteen ninety three, and looked for
patterns about what almost always happens. And what I've found
is this a pretty clear trend. Actually, so before the

(01:00):
election and up until about a month after the election,
kiwis do routinely by fewer houses. Now it's not by
a huge amount, it's by kind of somewhere between four
to ten percent. Fewer houses before the election and then
on average they start making up for lost time after it.
And I think what this does come down to is

(01:22):
the uncertainty about the outcome, the uncertainty about the policy
settings or what might happen afterwards. It just makes some
people decide to hold back a little bit, delay that
big decision, delay taking out that mess of mortgage or switching,
hopes of just saying, oh, wait and see what happens
after the election. And I think we all kind of

(01:43):
knew or sense that that might be the case. But
it's interesting to see that once you look at the data, Hey,
that's what actually happens.

Speaker 2 (01:50):
Yeah, that's interesting. Does if you're going through those different
elections and the different results and then mapping it onto
activity in the housing market or plopping it against activity
in the housing market, can you see any discernible difference
depending on who wins?

Speaker 3 (02:05):
You actually do? I was a little bit surprised by
this now bearing by just before I tell you what
the results actually are, because we're only looking at eleven elections.
I think six of them were won by national, five
of them were won by labor, and so we are
talking about a very very very small sample size. But
when I do split it out like that. We have

(02:28):
seen historically that property sales so people buy more houses
when national ones. Now that could be for a few reasons, yes, okay,
maybe one part is that people think that national might
be better for housing policy despite the fact that here's a
curly one four you jack. House prices have tended to
go up faster under labor than national in the past.

(02:50):
But putting that aside, some people think that national might
be better for housing policy, so they might pile in.

Speaker 2 (02:56):
Some of it also.

Speaker 3 (02:57):
Comes down to just when national have gotten in the past.
So if I think about the two most recent times
where a national government came in, one happened in the GFC.
Now John Key comes in, and what happens is the
property market was already in the middle of a downturn
right and then we had a rapid recovery. So did

(03:19):
we see how sales increase when national came in because
John Key got it or was it because there was
a recovery happening anyway from the GENFC? And then even
if we look at the last election, think about what
was happening there. We were in the middle of this
absolute housing market downturned. We were well below average in
terms of how many properties were being purchased. Then Christopher

(03:40):
Luxin gets it. Now, did he change all the policies
and back the housing market will better? No, but we
started buying more houses because that was the sickly that
was the right part of the cycle where people were
going to start to purchase more houses. So that's where
I've just tried to be a little bit careful and say, hey,
it's not all doubt of the politicians. Yes, sometimes it's
just what's happening in the property market at the time.

Speaker 2 (04:02):
It's the old correlation versus causation situation, Right, You've got
to be very care So I'm glad that you've given
us that you know that that precursor, because that's a
very important point. What does this mean though, for people
who are thinking about purchasing property property at the moment.
Is there anything that can kind of take out of
this Well.

Speaker 3 (04:19):
I think there's a little bit of an opportunity for
the wily people out there who are planning a purchase
and think, Okay, I know that the property market's going
to be a bit quieter in the call it six
months before the election. Maybe if I'm not so worried
about who's going to get in because I'm buying this

(04:40):
for myself to live in. Right, I'm going to eat
a house where the labor or national wins the election.
If I know that the market's going to be a
little bit quieter, maybe I can negotiate a bit. And
maybe you start saying to the real estate agent, well,
you know the election is going to make a lot
of people uncertain. Maybe I'll hold off, but actually, if
I can get a good price, if you accept this

(05:00):
lower price, yeah, I'll do the deal before the election,
because we all know that's going to be If it's
quite a market, we can use that to our advantage.

Speaker 2 (05:08):
Yeah, right, that makes total sense. That's very interesting. Thank
you for crunching the numbers for a seat.

Speaker 3 (05:14):
Thanks.

Speaker 2 (05:14):
Yeah, we appreciate It'd be very interesting, actually, given the
events of the world at the moment, the state of
our economy, to go in a year's time and look
back at the kind of sales data from this year
and see what impact the elections actually had. Ian McKnight
there from Opie's partner is our personal finance expert.

Speaker 1 (05:30):
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