It’s an election year in BC, which up until a few months ago looked pretty uneventful.
The BC New Democratic Party (NDP) was essentially on cruise-control heading for an easy victory, with no serious political challenger(s) in sight.
But then, the BC United party folded, which led to many of their former supporters getting behind the BC Conservatives, who as of the time of writing are neck-and-neck with the BC NDP according to various polls.
Whatever your politics may be, this provincial election is bound to be one for the history books.
If it’s not one thing, it’s another
Speaking of history, I’ve noticed sales in the region haven’t been responding to rate cuts as quickly as they have in some previous historical periods.
It got me thinking whether there may be some hesitancy to transact in property due to the current nail-biter of an election, which pits the BC NDP’s somewhat “heavy-handed” approach1 to housing policy against the BC Conservatives “common sense” approach2.
Maybe people are just waiting to see who wins before jumping back into the market?
It’s always hard to say for sure whether it’s purely the politics that’s holding buyers on the sidelines at any given point in time, as there are so many other factors at play.
Currently, for example, the economy is still digesting the impacts of the highest inflation seen in decades, mortgage rates and borrowing costs remain quite high relative to recent history, unemployment in BC and Canada is starting to tick up a bit recently – and the list goes on.
But amidst all these challenges affecting the economy, the GVR market has actually been tracking our forecast fairly well up until the August/September data, which have come in a bit softer than our modelling had anticipated.
Anyways – this all got me wondering, is the uncertainty over the upcoming election possibly holding back market activity?
If so, the natural question that follows is: what typically happens to the market after the election?
Mud will be slung
Like so many elections before this one, it’s guaranteed that the record on “housing affordability” will come under scrutiny, serving as the mud to be slung from parties of all sides.
As fun as it is to sling mud, I thought it’d be interesting to look at what the data has to say about this issue, from the perspective of analyzing impacts on sales and prices.
I’ll start out by focusing on price appreciation as a narrow measure of the “success” of various political parties over time.
I know this is not a perfect measure - there’s so much more to the “affordability” equation than just focusing on prices.
But it’s hard to argue prices have no bearing on the “level of affordability”, or that they do not serve as a reasonable proxy for this nebulous and difficult-to-precisely-quantify metric.
Since elections are held every four years, I figured it makes the most sense to look at the 48 months after each election, to see what happened to sales and prices in the GVR market under previous successive governments.
To kick it off, here’s a (very long) plot doing just that for home prices3, beginning way back in 1996.
The price of humility
Looking at the plot, it seems like the 1996 BC NDP under Glen Clark somehow managed to keep a lid on price escalation during their tenure.
It’s not entirely clear how they managed to do that, as this wasn’t a government that came in swinging on the housing file4.
My guess is that inheriting an economy still recovering from the recession of the early 1990s probably helped keep things contained, as did the fact inventory levels were among the highest on record in our historical MLS data.
In more recent times, the BC NDP party under John Horgan’s leadership (2017-2022 ish) actually seemed to have managed to keep prices from rising too quickly up until the pandemic era (starting around 2020).
It probably helped that home prices had appreciated fairly rapidly in the two decades leading up to 2017, and like all things running at full-tilt for that long, everything eventually needs a breather.
But alas, breathers are by their very nature, temporary.
And David Eby now finds himself at the helm of the BC NDP party, heading into an election where the previous success of Horgan’s tenure in keeping price escalation at bay is an increasingly distant memory in voters’ minds.
Perhaps that spells trouble ahead for the BC NDP, but time will tell (shortly!).
In any case, the main takeaway from this plot is that politicians will make big promises about affordability which are often much harder to keep in reality, since there are myriad factors that influence the housing market at any given moment.
Maybe that’s something worth pondering on the way to the ballot box.
Selling out
Returning to the original question of this post however, I was curious whether we might expect the resolution of the upcoming election to result in any meaningful boost to sales activity.
As a theory, it seems pretty reasonable to think that every election comes with a lot of uncertainty for voters (though not always directly related to housing).
And maybe people act in predictably repetitive ways throughout history when it comes to buying a home after an election?
It’s a theory, anyway.
But let’s see what the data has to say about it:
Not always up, not always down
Similar to the case of price escalation, the patterns of sales activity are a bit of mixed bag.
Four out of seven elections saw sales increase immediately after to varying degrees, while three out of seven saw sales decline.
It’s interesting to note that sales activity popped by about 50 per cent after the election of the BC NDP in 1996, especially since it was noted earlier that this was a government that (somehow) managed to keep a lid on price escalation during their tenure.
Usually, high sales activity is often correlated with rising prices, so it stands to reason other factors were at play keeping prices from escalating back then5.
And despite the long reign of the BC Liberals, who saw home prices grow considerably under their tenure, transaction levels did not consistently spike after each election that ushered them into power. This, again, suggests that there are often many factors at play.
Finally, it’s hard to say that the reign of the current BC NDP government has been positive for transaction volumes, with levels of activity down nearly 40 per cent since the 2020 election.
But again, there are many factors at play, and it probably wouldn’t be fair to attribute this entirely to the policies of the current BC NDP government under Eby6.
The final ballot
What have we learned here?
To start, I suppose this analysis highlights the fact that policies targeting the housing market don’t always have their intended impacts, and it can be difficult to for a political party to “bend the market” to their will.
It’s easier said than done.
Second, (and related to the first point), politics alone probably doesn’t contain much in the way of predictive value for forecasting near-term housing market outcomes, with few exceptions.
Third, after wading through these data, I’m not so sure that the results of the upcoming election will have some materially large effect on home sales in our region – there wasn’t a consistent enough pattern in the data to support that theory.
At the same time, the data suggests it’s also hard to entirely rule out that possibility. We have seen some big upswings after a few previous elections.
In parting, I’ll leave you with an educated guess.
I think the outcomes of the remaining two policy rate announcements this year will probably do more to move the needle on sales and prices in our market than the upcoming election.
We’re about to find out if the future proves me wrong.
Footnotes
In reference to their recent slate of policies that tend to override the authority of local governments and prescribe what property owners may and may not do with their property.↩︎
Which remain somewhat murky at the time of writing, not being clearly defined as a cohesive set of policies. Paraphrasing snippets gleaned from various media, their theme might be loosely interpreted as “undoing what the NDP has done” in many respects.↩︎
These are trended average price data, indexed to the date of each election.↩︎
At least not from what I could glean by dusting off their old policy manual.↩︎
Probably those record high inventory levels!↩︎
Tempting as that may be for the opposition!↩︎