Published: Friday 8th May 2015 by The News Editor
The election outcome is set to inject a fresh lease of life into the prime London housing market, which will ripple out to other parts of the country, experts have predicted.
With Labour’s proposed mansion tax on properties worth more than £2 million having drifted out of view, economists and estate agents said they expect to see renewed interest in London’s top end property market, which had been showing signs of cooling down in recent months.
Sales are predicted to pick up generally, with estate agents saying they expect a busy summer ahead as buyers and sellers who had been holding back enter the market.
Lucian Cook, head of residential research at Savills, predicted that prices in prime central London, which includes the top 5% of properties, will increase by 22.7% over the coming five years. Prices of prime properties situated outside the capital are forecast to surge by 23.9% in the next five years.
Savills had also produced an alternative forecast which found that in the event of a mansion tax being introduced, prices in prime central London would have increased by around 15.9% over the five-year period.
Across the UK generally, property values are now set to increase by around 19.3% over the coming five years, while in London generally they will increase by 10.4%, Savills predicts.
Shares in London-focused estate agent Foxtons jumped as the election results emerged, with house builders including Barratt Developments and Taylor Wimpey also performing strongly.
Mr Cook said that the momentum in the London market is “likely to be sufficient to trigger a renewed ripple effect into the markets beyond the capital, as those relocating from London find it easier to sell their existing home and take advantage of the price differentials with the rest of the country”.
He said: “We expect the mainstream housing markets to pick up a little momentum over the short term, simply because of greater certainty over the political landscape and economic policy.
“That is likely to result in an uptick in new buyer enquiries and transaction levels generally.”
With London house prices being significantly higher than those elsewhere, Mr Cook said he expected the biggest growth to be seen outside the capital, with the south of England in particular seeing growth in the medium term as buyers look for value in commuter belt areas.
He continued: “Political certainty is also likely to prevent a dip in house building, as planning policies put in place prior to the election gain further traction. However, there remains a pressing need for substantially increased new build supply and a far more co-ordinated long term housing strategy for the UK.”
Jonathan Adams, director of prime central London estate agency Napier Watt, said: ” We expect the property market, which has been rather subdued of late as buyers and sellers adopted a ‘wait and see’ attitude, to now pick up.
“Many people have been holding off making a decision because of the uncertainty, and as we would always expect May, June and July to be our best months with foreign buyers from overseas, we are all set for a busy summer.”
Recent Land Registry figures showed that across England and Wales, 851 homes were sold for over £1 million in January, marking a 19% fall compared with January last year, when 1,049 properties in this bracket were snapped up. The bulk of the transactions were in London, which saw a sharp 23% decline in sales in this bracket compared with a year earlier.
House prices in Kensington and Chelsea, where the average property is worth £1.29 million, have shown the slowest annual growth over the last year of all the London boroughs, recording a 5.2% upswing.
Ed Stansfield, chief property economist at Capital Economics, said: ” It is easy to overstate the importance of the election for the market. Admittedly, the economy will probably now face a bigger fiscal squeeze than if Labour had been in power, but interest rates will presumably be kept very low to compensate. Moreover, the economy’s fundamentals are pretty good, I doubt the squeeze will derail the recovery.
“The one area of the market that will see a change is prime central London, where the demise of Labour’s mansion tax proposals will probably give it a new lease of life.”
Mark Hayward, managing director of the National Association of Estate Agents (NAEA) said the problem lack of supply in the housing market is still “a huge issue plaguing our country”.
Melanie Leech, chief executive of the British Property Federation, said: “Our industry has the potential to significantly increase the amount of housing in the UK, regenerate our towns and cities, and contribute significantly to the economy if it is provided with the right legislative framework, and we look forward to working with the next government to achieve this.”
Peter Rollings, CEO of estate agent Marsh and Parsons, said: “The top-end market will be breathing a huge sigh of relief that £2 million-plus properties won’t be penalised by a mansion tax, a levy that would have stifled activity in the capital and across the South East.
“Any such tax could also have had implications on lower rungs of the property ladder too, so it is not just wealthier home owners who should be counting their blessings.
“The post-election feel-good factor could kick in immediately and 2015 may prove to be a reversed version of 2014 in starting slowly and finishing strongly.”
Published: Friday 8th May 2015 by The News Editor