The prime central London property market is set to return to pre-election growth rates thanks to renewed confidence, according to property expert Richard Barber.
Barber, who is the director of estate agents W.A.Ellis, part of the JLL Group, says that the market was slowed down by election jitters but with a Conservative victory many are breathing a sigh of relief and business is expected to rebound in the months to come.
“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 per cent. 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 (SDLT) reforms of late 2014, ” he said.
“It is this last point that still hangs over the upper end of the market and still restricts transaction levels and potential capital growth. Whether Mr Osborne’s decision to raise SDLT to 12 per cent on the proportion of a purchase over £1,500,000, 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.
With the election now over, the politicising of housing issues can stop and the government will be able to focus on finding working solutions for the problems on the market, Barber says and comments:
“…the Government can address the genuine issues which we are all faced with. 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 5 years at circa 2 per cent, is as good as it will get, and one should act swiftly to obtain these short term offers.
“The shortage of suitable housing for older people is keeping homeowners stuck in properties worth £820 billion and leaving £7.7 million spare bedrooms empty. Research carried out by Legal and General and The Centre for Economic and Business Research (CEBR), suggests that almost a third of homeowners over the age of 55 have considered downsizing over the past five years, yet only 7 per cent have actually done so.
“It would seem obvious considering the above, 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.
“All of the above would suggest 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.”
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