Property agents hope Brexit extension will dispel housing market gloom. They say it could encourage buyers to take advantage of static property prices and cheap fixed-rate mortgages. A variety of factors, however, have kept a lid on London’s residential market’s activity and prices for some time.
Several reasons behind slack property market
Although Brexit has been dominating market sentiment, the buy-to-let market has been under pressure because of other key changes. London’s house and apartment market has been weak because the authorities have tightened regulations on foreign corporate purchases.
In particular, clamps apply to opaque deals from tax havens to counter alleged money laundering from Russia, the Middle East, China and Africa. Foreign companies must pay a 15 per cent stamp duty on commercial and residential properties priced above £500,000. (Under that level, the tax is 3 per cent). Foreign investors also have to pay a minimum capital gains tax of 18 per cent if they profit from sales of their UK property. Local residents also have to pay steep stamp duties on high-priced properties.
The government has plans to change legislation on tenant evictions. The private rental market has grown from two million to 4.5 million households in the past two decades, including 1.7 million families with children, official figures show.
In terms of the current Housing Act, landlords can evict tenants within eight weeks of a fixed-term tenancy without specifying a reason. The government intends changing the rules to counter the rise in the number of homeless people. Landlords will still be able to evict tenants who have not paid the rent, have damaged the property or caused a nuisance. Landlords, however, fear potential bureaucracy and rental payment problems. They are lobbying for adjustments to the government’s plans.
Average price by property type for London (source Land Registry)
|Property type||February 2019||February 2018||Difference %|
Hopes for a slight price revival, although foreign investors fear Labour Government
Despite these fears, agents have expressed a slight increase in optimism in the slack residential property market. They are hoping that Brexit will be delayed until October and could even be kicked into the long grass. Despite that, Singaporean and other Asian investors are likely to be wary. They fear that the Brexit mess could well bring in its wake a hard-left Labour government that could tighten the screws even further on foreign landlords. Moreover, the pound could weaken.
But it’s spring time, and since this is the normal buying season, agents have encouraged sellers in London to raise asking prices slightly, according to Rightmove, a residential real estate information company.
“The Brexit extension could give hesitating home movers encouragement that there is now a window of relative certainty in uncertain times,” says Miles Shipside, Rightmove director and housing market analyst. “We are not anticipating an activity surge, but maybe a wave of relief that releases some pent-up demand to take advantage of static property prices and cheap fixed-rate mortgages.”
The purchasing trend in the coming spring and summer months will thus be interesting and will hopefully dispel some of the gloom.
Recent UK and London Price trends
In March, UK house prices rose by only 0.2 per cent since January 2018, according to Nationwide, a building society. On average, London prices fell and are down 3.9 per cent on the same time last year.
In contrast, the relatively low-priced areas of the North West and East Midlands and Scotland experienced annual growth of 2.9 per cent, 2.6 per cent and 2.5 per cent respectively. The average house price in Britain was £226,000 in February, according to the Office of National Statistics, compared to a peak of £232,000 in August 2018. The average price of London property at £460,000 compares with North East England’s average of only £125,000.
Enquiries from new buyers fell for an eighth consecutive month in March, according to the Royal Institution of Chartered Surveyors (RICS). More than a quarter of the 300 chartered surveyors questioned in its March residential market survey said they had seen a fall in buyer demand across all parts of the UK, causing the number of agreed sales to drop.
However, the RICS also reported “more optimism” about a modest improvement in activity in the UK over the next 12 months.
But in high-priced London and the South East, surveyors expect prices to continue to fall.
© Copyright Neil
Behrmann. This article was first published in The Business
Neil Behrmannis London correspondent of The Business Times. Jack of Diamonds his thriller on global diamond mining and smuggling, has recently been published. It is the sequel to the thriller, Trader Jack, The Story of Jack Miner. See reviews of both books on: https://www.amazon.co.uk/Neil-Behrmann/e/B005HA9E3M