Whether we like it or not politics has a major influence on all areas of our life and that includes investment in property. To what degree you should consider the political environment in a country where you are looking at an investment in property will vary but it should certainly be a consideration. The bottom line is that the political situation in any country will dictate an array of policies and the direction of the economy at least in the short to medium term.
Uncertainty breeds uncertainty
We only need to look at the Turkish political scene to see an area of the world which has made great progress over the last 20 or 30 years but appears to be taking a step backwards. Turkey has always had a buoyant property market, seen by many as the place where East meets West, but recent developments in the political scene are worrying. It looks, at least from a distance, as though the Turkish government is on the verge of falling out with the likes of the US having reintroduced certain policies since the attempted coup.
This is just an example where any type of political uncertainty breeds uncertainty with investors – having an impact upon the economy and exchange rates. Would you buy a property in an area of the world with such uncertainty in the short to medium term?
Whether you are facing a left-wing Labour Party or a right-wing Conservative Party you will need to take into account potential economic policies. Historically in the UK the Labour Party has been seen as anti-business while the Conservative Party is often seen as pro-business. In theory you would expect to see a more buoyant economy under a capitalist-based political government but this will also depend upon a variety of different elements such as the size of a government’s majority.
There is no doubt that under traditional circumstances property markets tend to perform much better under a more right leaning political government in favour of capitalism. This is not always the case but governments seen to be pro-business tend to attract greater domestic and overseas investment in many areas including property.
On the flip side of the economic policies coin is the housing policy of the government of the day. In the past Labour governments in the UK for example have built more council housing while Conservative governments have tended to leave any shortfall for the private sector to accommodate. That said UK governments going back 30 or 40 years have underinvested time, money and effort into the housing new build sector leading to a massive shortfall today.
In some ways this shows that whether a political party has a left-leaning or right-leaning agenda they do not always act as you might expect.
Unfortunately the political arena in any country around the world has a significant impact upon the local economy and local property market. Different types of government will likely introduce different regulations covering property investment and taxes and you need to be fully aware of any potential changes. There are so many different factors to take into consideration when looking towards property investment and politics should certainly be one of these.