Uncertainty over the outcome of the general election is likely to boost the corporate lettings sector in particular and London property prices will ease into a slower rate of growth, according to estate agent Marsh & Parsons.
They expect prime London house prices to rise up to 5% in 2015, compared to the 11.4% increase witnessed over the past 12 months. Annual growth is forecast to be strongest in outer prime London where typical house prices are 25% lower than across prime London as a whole, fuelling higher demand. But in the most expensive prime central areas of the capital, prices will climb by 3%.
Marsh & Parsons expects the feel good factor to remain into 2015 for sellers and with mortgage rates as competitive as ever, it is also continues to represent a good opportunity for buyers too.
‘The London housing market gave a stellar performance in the first half of 2014, but there won’t be quite the same encore next year. However, the curtain certainly isn’t going down on price growth. After touching the brakes in recent months, property values will continue to climb steadily again in 2015, albeit at a more modest and orderly pace,’ said Peter Rollings, chief executive officer of Marsh & Parsons.
‘Demand for prime London property remains stable, and after adapting to the mortgage market reform (MMR) changes and tighter affordability measures introduced this year, buyers are more motivated than ever, maintaining sales momentum and ensuring that property prices will not stand idle,’ he explained.
‘The general election will act to stimulate the market, removing much uncertainty and drawing a line under any hesitation from buyers and sellers, but this isn’t to say that the first five months of the year will be a write off as London won’t stop working,’ he added.
Marsh & Parsons expects more vigorous growth in prime London rents, forecasting increases of 10% throughout 2015. The firm points out that following a period of largely stagnant rental prices, rents in prime London have climbed steadily during 2014, and the pace of growth will pick up over the next 12 months.
Corporate tenancies have grown 14% in 2014 compared to the same period in 2013, and burgeoning demand for corporate lettings and relocations will ensure continued expansion of this sector next year.
‘The rental market will be where much of the action takes place in 2015. Those relocating to the capital for work are now biding their time before purchasing their own portion of London property, until question marks surrounding additional property taxes are erased,’ said Rollings.
‘This will push demand in the corporate lettings sector even further, and the biggest rental increases are predicted to be among one or two bedroom flats. Supply of rental properties looks set to be sustained, but any regulatory changes to tenancy fees under a new government could inflate rents artificially,’ he pointed out.
‘The powers that be need to ensure that landlords are not spooked out of the market by unnecessary layers of legislation, and that aspiring property investors don’t take their money elsewhere,’ he added.
The firm believes that any interest rate rise during the next 12 months will have minimal impact on the housing market, and the increase, if any, is only estimated to be between 0.25% and 0.5%.
‘With an array of attractive mortgage products on the market, and many home owners tied into existing deals, an interest rate rise towards the latter end of 2015 is unlikely to cause any seismic shifts in the property landscape,’ Rollings explained.
‘Even after a lift, interest rates will still remain remarkably low, and the primary preoccupation for buyers will not be interest rates, but accessing competitive mortgages which government initiatives have been making much easier,’ he concluded.
