House Price and Transactions with UK Elections

We are just getting over the not so shocking election result in UK (8th June 2017).

I wanted to look at house prices and how they are affected by election results.

The graphs below plot House Price/ Number of Transactions against date (blue dots). The data is averaged over a month and is normalised to 1.0.

The vertical lines represent UK general elections with blue representing clear results (clear majority) and black lines representing hung Parliament. There is a black line (2nd from right) that represents EU Referendum (‘Brexit’).

The orange dots represent GBP (Sterling) performing against INR (Indian Rupee) and CNY (Chinese Yuan). The data is daily average normalised to 1.0.

We can see house prices grow aggressively after clear results. The period from 2008 onward is the ‘financial’ crisis era which is further complicated by a hung Parliament in 2010. The actual recovery takes a few years and by 2014 the boom times are back! The growth is further enhanced by a Conservative majority in 2015.

It is too early to see the impact of Brexit on the housing market but as far as GBP goes there has been a fall against all major currencies.

This means investment into the UK housing market is made cheaper for ‘international’ buyers. The growth in house prices is compensated by the fall in the pound (we can see this by the relative falls in the two graphs).

Already the house price increase is cooling off (falling in many regions where they were over-inflated to begin with). With the messy general election of 2017 increasing the uncertainty, especially around Brexit, the house prices from internal demand should decrease or flatten out. We can already see this starting. People might rush in to lock their mortgage (thereby boosting short term demand) as Bank of England has indicated a rise in Interest Rates in the near future.

What happens if look at the number of transactions? The normalised graph  above shows that during the financial crisis era the transactions fell sharply. Then began to revive (correlates with the rise in house prices). The strong position of the Conservatives further supported the market.

But as soon as the Stamp Duty increase came into the picture the number of transactions started reducing and after ‘Brexit’ leading up to the 2017 General Election we can see a sharp fall in transactions.

All of these things indicate that people are not sure about what will happen in the future so are not willing to take positions of risk.

Stamp duty change

Stamp duty change (1st April 2016)

A final interesting titbit – Why is there a massive spike in transactions in a subdued period of house sales (the red arrow)? And no this is not an error! The month is March 2016 – and the spike is there because stamp duty changes were being introduced from 1st April 2016 which meant buying a second home (without selling the first one) would become a lot more expensive!

[This analysis uses the Land Registry data set which is processed using Apache Spark, Python was used to further process and plot the data]

UK Elections: The First Debate

In my view the pre-election debate is an excellent idea.  Today in the first debate it put the politicians in the middle of the arena to face the UK public for the first time.

Since it was a live debate with audience questions and a very strict presenter the politicians were not able to get away by arguing and making unrealistic claims like a bunch of 10 year old kids.

Now the three personalities standing in the firing line Nick Clegg from Liberal Democrats, David Cameron from the Conservatives and Gordon Brown from Labour are quite impressive.

Gordon Brown, starting with the disadvantage of having faced some of the toughest times ever seen, brings a certain mature, almost elderly, calm and solidity. After having faced the pressure he appears as a person who has seen and done it all. Not a very good feeling to give out if you are running for four more years as the leader of the country. The new leader needs to have some fire in him, I believe.

David Cameron was the Poet Parrot in th debate. Whenever he was asked a question he started by confirming the issues raised in the question were important and valid (duh! David that is why they asked the question!) and then mixed in words which would befit a poet writing a song to raise the moral of troops on the frontline… something like ‘we shall over come’. There were certain moments in the debate when both Gordon Brown and Nick Clegg were ganging up against him and he looked positively peeved.

Nick Clegg was the winner of the debate for me. He did appear to tackle the questions head on with some common sense and logic. He smashed his earlier image of being a ‘radical’ and emerged as a person with some real ideas and thoughts on how to run the country out of troubled times. He made sure that the public sees Lib Dem as a real option and not just a fringe party which is in there just to kick down the established order.

For their closing statement Gordon Brown played the roles of a grandfather talking about things to come. David Cameron recited a few rousing lines as to why Conservatives and Nick Clegg spread some fairydust around trying  hard to make people believe that Lib Dem are a real option.

The other day I heard on Radio Four someone saying that if Nick Clegg won the elections he would be the most surprised man in UK. After today’s debat he seems to have come one step closer to ensuring that Lib Dems are seen a real alternative. I hope he doesn”t forget that sometimes trying too hard can leave you with a red face. 😉

My prediction after the first debate: Nick Clegg and Gordon Brown ganging up to form the next government.

UK Elections: A Ringside View

UK Government elections are coming up in a few weeks time (May first week).  This election is a face-off between the Labour Party, who have been in power for the last 12 years, and the Conservative Party, who are sensing a real chance to form the government this time. There is a third party – the Liberal Democrats, dream of becoming king-makers and in reality can seriously affect the base of the two established parties.

One issue which, according to those who claim to be the ‘experts’, is going to dominate the voter’s minds is the economic crisis that gripped UK last year.

I believe that in politics your point of view is decided not by logic or analysis but by the political party that you belong to. Keeping this in mind, the fact that the UK economy has just about limped clear of the recession can be seen from three different prespectives.  

The Labour view is that they have taken some ‘very difficult’ decisions through some of the ‘toughest times’ seen by ‘world’ economy and have guided the UK economy out of the battlefield. According to the Labour government the economic crisis was not of their creation but something external in which the UK economy got dragged into.

The Conservatives have the view that Labour was responsible for the country facing such difficult times. That if they had been in power they could have helped UK sustain the storm better.

The Lib-Dems do not have a clear view of things. They keep changing their views depending on what the two major parties are saying.

There is one thing though, that all three of them agree on:  they have to take some ‘very difficult’ decisions and  some of the ‘toughest times’ are still ahead for the country.  

All three are saying there have to be big cuts in Government spending to reduce the deficit. But what exactly should be cut and how the resulting gaps will be filled, changes with the party. Great fear is also being generated regarding cuts in frontline services (e.g. Police and NHS).

What no one is willing to admit is the fact that the road ahead is not full of options. The steps that can be taken are limited. Yet the voters are being fooled into believing that there are multiple roads out of the mess and that each party holds the map to a different route.

Looking at these things from a temporary resident’s point of view I can say if frontline services like NHS and Police are cut then it will surely make the country less attractive for skilled workers. Free healthcare and a safety are two major requirements especially when it comes to people with families.

Immigration is the second point where these parties will clash. Again there are not that many options out. Already immigrations laws are very strict. Apart from closing the Tier 2 (Work Permit) and Tier 1 (Migrant Worker) schemes to South Asians (which will damage the UK economy and push work out of the country) they really can’t do anything.

To clamp down on illegal immigration will require increased government spending (for better border security and tougher enforcement) but the question remains: where will the money come from? Also the government will never admit this but illegal immigrants contribute a lot to the UK economy. They do the kinds of job which the locals will not do. Illegal immigrants, in fact, help the UK economy by providing cheap labour. They don’t pay any tax but even if they were legal the amount they earn would keep them well below the tax bracket.

In my view this election is going to be about whichever party screams the loudest and is able to convince the UK voter that yes indeed they can pull rabbits out of hats and pennies out of thin air!