Optimism and confidence returns to prime central London property sector
Optimism and confidence are returning to the prime central London property market after a long period of hesitancy amongst both purchasers and potential vendors in the run up to the general election, the latest research suggests.
Viewings, offers, and sales have increased since 08 May across all sectors of the market and enquiries from both international and domestic purchasers have increased, particularly from the Middle East, according to W.A. Ellis, part of the JLL Group.
The firm reports that in broad terms, capital values within the prime central London market fell during the first quarter of the year as the prospect of a Labour Government slowed the sales market and the level of transactions declined by as much as 30% in some sectors, with the number of house sales declining most significantly.
‘With the election over and a Conservative Government now in place, we believe that the market will revert to its pre-election state. We expect the price falls of recent months to reverse, with some price rises materialising and with five year predicted growth estimated to be in excess of 20%,’ said director Richard Barber.
‘However, we still expect price growth to be quite modest this year, particularly as the market has not yet had time to adapt to the stamp duty reforms of late 2014. This still hangs over the upper end of the market and still restricts transaction levels and potential capital growth,’ he explained.
‘Whether the decision to raise SDLT to 12% on the proportion of a purchase over £1.5 million will be regarded as a masterstroke in defeating mansion tax and cooling central London prices or, as I believe is more likely, an overzealous measure which will reduce HMRC's revenues, is yet to be decided,’ he pointed out.
He now hopes that the ‘politicising’ of the market will cease and the Government can address genuine issues. ‘What is most apparent, however, is that mortgage rates will undoubtedly begin to rise as long term swap rates begin to creep upwards and affordability, particularly for first young time buyers, will be strongly affected. My view, and it is one shared with many within the industry, is that a mortgage rate fixed for five years at circa 2%, is as good as it will get, and one should act swiftly to obtain these short term offers,’ said Barber.
He also mentioned the shortage of suitable housing for older people that is keeping home owners stuck in properties worth £820 billion and leaving £7.7 million spare bedrooms empty. Recent research suggests that almost a third of home owners over the age of 55 have considered downsizing over the past five years, yet only 7% have actually done so.
‘It would seem obvious that older people are remaining in their homes due to a fear of their children not being able to afford homes of their own, the transactional costs involved in downsizing, including prohibitive stamp duty, and, particularly within London, the differential in price between life on one floor within a flat, and life on five within the traditional family house,’ Barber said.
‘All of this would suggests that the Government should concentrate on increasing liquidity and revenues by reducing the upper level of stamp duty and building both affordable homes for young people, and incentivising developers to build for cash rich older purchasers whose needs are not so obviously addressed,’ he concluded.