SPECIAL FEATURE: Central London is back in business
Pre-election what were the main factors which contributed to lower central London house prices?
The three commonly cited factors were the impact of the Stamp Duty changes, the Labour manifesto around non-domicile tax and the potential effect of the mansion tax. Clearly, all three elements of this are political in nature and fuelled uncertainty and doubt for investors across the prime and central London property sphere.
The market has been nervous about this over the past year, with the mansion tax a well sign-posted initiative, the pursuit of non-domicile citizens a more recent development, and the Stamp Duty changes casting a wet blanket over the ‘engine’ of the UK property machine. According to property consultancy DTZ, across 640 prime central London transactions, Stamp Duty receipts were down from £125,000,000 to £90,000,000 for the same period in 2014, reflecting falling sales.
So what does the Conservative win mean for the London and wider UK property market?
We believe a Conservative majority government means business as usual for the property market. We’re already seeing stock market confidence in the sector returning and anticipate that investors will quickly follow suit. With the prospect of a mansion and non-dom tax removed, we believe investors are unlikely to continue to hesitate. With regards to Stamp Duty, given that the changes are relatively favourable for lower value properties, the vast majority of the BTL market has actually benefitted from the change – with only properties over £1m seeing an increase.
We particularly expect confidence to return to Central London, but it remains to be seen how much more prices will rise. When asked, our property investor clients said that they expected to see a large increase in both property values and rents in 2015.
How will government pledges such as increased house building, including 200,000 Starter Homes, and the extension of Right to Buy to tenants in Housing Associations affect the rental sector?
We welcome any moves that will help to ease the restricted housing supply this country faces, and the government’s pledges on house building are a step in the right direction. However, these numbers alone will not fill the gap and the private rental sector remains the driving force behind the UK’s property market. This makes it more important than ever to have rental housing that is fit for purpose.
Among our own clients we are seeing moves to meet the growing needs of the private rental sector, often through refurbishment, expanding existing properties, or converting properties into houses of multiple occupancy.
We see the move to extend the Right to Buy scheme as part of a wider decline in the supply of social housing available to tenants. By encouraging tenants of Housing Associations to buy their homes, the government is increasing the reliance of remaining social tenants on availability within the private rental sector. Demand for the private rental sector is therefore the catalyst for the growth of the housing market moving forward.
So what are the prospects for the next year?
We expect the property sector to return to the upwards trend of the last few years. It remains to be seen exactly how manifesto pledges such as increased house building and Right to Buy will play out and the impact they will have on the market. We anticipate that the private rental sector will fall under continued government scrutiny, but at the moment the signs are once again positive for the UK’s property market.