Average UK house prices rose 4.5% in 2015, according to the latest residential market update from real estate firm Knight Frank.
Average values in prime central London rose by 1% last year on average, but the rate of growth varied across the capital while prime country house prices rose by 3.1% in 2015.
The report says that the Bank of England’s decision to keep interest rates on hold in January, coupled with the continued fall in oil prices has prompted some economists to push back the date on which the first UK rate rise is expected to 2017.
‘A longer period of low mortgage rates, alongside firmer wage growth and a continued lack of new and second-hand housing stock, should continue to underpin overall pricing during 2016. Activity has been gradually picking up in recent years, but this trend is likely to be hampered by the continued lack of supply of homes coming to the market across the country,’ said Grainne Gilmore, head of residential research at Knight Frank.
She also pointed out that the Government has announced a raft of new policies to boost the supply of housing, a recognition that housing is now one of the key areas of focus for the electorate.
A breakdown of the figures in the report show that in prime central London the biggest rise in prices has been in Islington with growth of 6.4%, followed by City and Fringe at 5.7%, Marylebone at 4.7%, Mayfair at 3%, and Kensington at 2.5%.
In St John’s Woods prices were unchanged and south of the river Southbank saw prices rise by 1.7% and Riverside growth of 4% but elsewhere prices fell, most notably a decline of 6.1% in Knightsbridge.
Prices were down 3.8% in Notting Hill, by 3.7% in South Kensington, by 2.7% in Chelsea, by 1.8% in Hyde Park and by 0.2% Belgravia.
Average rents across the country rose by 2.7% in the year to September, with the strongest rental growth across Greater London at 4.1% but rental growth in prime central London eased in the second half of last year, and now stands at 0.7%.
This comes after prime central London rents peaked at 4.2% growth in May. ‘This market is quite seasonal, and closely linked to the financial services sector. As a result, rents have been affected by restructuring plans announced by major European banks,’ explained Gilmore.
Prime rents increased by 2.7% in the South East and the East of England, by 2.1% in the East Midlands, by 1.9% in the West Midlands, by 1.8% in the South West, by 1.6% in Scotland, by 0.9% in Yorkshire and the Humber, by 0.7% in the North West and by 0.5% in Wales and the North East.
The report points out that certain sections of the housing market will also have to adjust to new stamp duty charges. There is an additional 3% stamp duty for those buying additional properties, whether as second homes or as buy to let investments.
The consultation on the new rules is due to close on 01 February and the detail will be announced at the Budget Statement in March. The new rules will then come into force on 01 April. ‘As a result there could be increased activity in the market in the first quarter as investors and second home purchasers look to complete before the higher charge comes into force,’ said Gilmore.
‘However, there are signs of a pick-up in activity in this market as buyers and vendors become more familiar with the new stamp duty environment. Viewings in November last year were higher than in November 2014 back before the new, higher, stamp duty rates had been introduced for properties worth more than £1.1 million,’ she pointed out.
‘But as with all prime markets, vendors and buyers now need to adjust again to the new additional stamp duty charges for buy to let and second home purchases due to come into force in April,’ she added.
The report shows that the sub £2 million and sub £1 million markets in London have seen some of the best performance in recent years. ‘These markets are less exposed to tax and are also more closely aligned to the domestic economy,’ Gilmore explained.
She added that those active in the prime country house market are also adjusting to the stamp duty rules introduced in December 2014 and Knight Frank data shows the number of £2 million plus homes sold in the three months to December was 15% higher than the preceding three month period, and was more than double the number sold in the first three months of the year.
‘The market is still being driven by prime properties in urban locations, with buyer demand concentrated on areas with effective transport links and good schools,’ added Gilmore.
