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State elections matter. But not for the property market

November 29, 2014

It's the Victorian State Election today (29th November), so we thought it would be interesting to see how the historic performance of the property market has been impacted by state election results. In summary these are our observations, based on REIV historical pricing data:

  • The political persuasion of the ruling Premier has no obvious bearing on how the market will perform.  Average annual growth has only been marginal higher whilst the Liberals have been in office (9.9% per year) than for Labor (9.1% per year). This difference is most likely due to the strong inflationary era of the early 1970s. Strong capital growth was a feature of both Liberal and Labor governments of the 1970s and 1980s.
  • Property performance can vary from term to term of the same Premier. For instance, Jeff Kennett’s first term saw prices go backwards by over 6%. But they rebounded nearly 43% in his second term.  Prices rose 43% in Steve Bracks’ first term and saw little growth in his second.
  • It is often said that elections dampen the property market as they cause uncertainty.  This does not appear to be the case with Victorian State elections.  Years containing elections have averaged 11.5% capital growth compared to 9.6% average annual capital growth for the whole period 1966 to date. Even elections where there has been a change of government have averaged 10.1% annual capital growth.
  • So notwithstanding state politicians having a strong influence over property taxes, grants and planning rules, elections themselves and the stripe of the Premier are of little consequence to house prices. The real drivers are the major structural economic issues - the opening up of the economy, the increased participation of women in the workforce, and changes in inflation and interest rates - and these are arguably outside the control of state governments.

Election Date

Change of Government?

Premier(s) over  term

% change in property prices in 12 months around election

% change in property prices over 3 years after start of first post-election financial year

Nov-14

?

Nov-10

Yes (Baillieu)

Ballieu/Napthine

6.7

13.5

Nov-06

No

Bracks/Brumby

6.1

35.0

Nov-02

No

Bracks

9.5

5.2

Sep-99

Yes (Bracks)

Bracks

15.7

43.0

Mar-96

No

Kennett

-1.4

42.8

Oct-92

Yes (Kennett)

Kennett

14.3

-6.1

Oct-88

No

Cain/Kirner

14

4.6

Mar-85

No

Cain

15.7

42.1

Apr-82

Yes (Cain)

Cain

3.6

39.2

May-79

No

Hamer/Thompson

9

28.0

Mar-76

No

Hamer

28.1

26.4

May-73

No

Hamer

36.6

79.8

May-70

No

Bolte/Hamer

3.5

67.8

Apr-67

No

Bolte

0

25.5

Average annual capital growth 1966-2014

9.60%

Average annual capital growth during Liberal rule

9.90%

Average annual capital growth during Labor rule

9.10%

Average annual  capital growth for election years

11.50%

Average annual capital growth in years when a change of government

10.10%

Data Source: http://www.reiv.com.au/Property-Research/Median-Prices/Market-History