Hanging UK MPs could have detrimental effect on housing market

Not exactly how it was worded in the UK press this week I’ll grant you, but I’m sure you get my gist. With polling stations up and down the country doing feverish business with motley crews of voters, by the time you read this the identity of the country’s next government should be known. But not, to explain my thinly-veiled opening reference to capital punishment, if we end up with a hung parliament.

Indeed, if 1 of the 3 warring parties is unable to rise above the threshold required to run the show single-handedly, we face the prospect of weeks, or even months of power broking which will inevitably have a detrimental effect on the housing market.

Before the circus took to the road, most experts were predicting an average (and that’s a very important qualification) annual price rise of 5% by the end of 2010. If we do end up with a hung parliament, you can bet your bottom dollar, sorry, euro, sorry, pound, on a significant downward revision of this optimistic prediction. Because if there’s one thing the housing market in the UK doesn’t like, it’s uncertainty.

However, smart investors will take these political shenanigans in their stride and not be tempted to bail out of the market. Rest assured it will only be a short-term dip (which might even see monthly returns turning negative again in the next few months as base interest rates slide temporarily upwards) which will correct itself by the time all the fuss is over. Interest rates will settle back into sub 3% territory by the end of the year for the simple reason that the economy’s recovery over the next few years (barring any unknown calamities) can only be gradual at best.

Having said that, if I were looking to buy into the UK property market any time soon, nipping in during a hung-parliament hiatus and taking advantage of whatever panic selling that does arise, might not be a bad move at all.

But now of course I find myself at a disadvantage, for you, most likely, already know the result. So if I was wrong and they didn’t hang themselves, please just ignore me.