For six years, the south of the country has seen house prices increase at a greater rate than the north, however this year housing analysts are predicting that this trend could be about to change.
London set to see a fall
The Guardian reported this week that house values in the capital are set to fall by 3.6% following “years of over-performance”. The Centre of Economics and Business Research (CEBR), who produced the research, also said that house prices across the country will generally rise by 1.5%. It is the first time in six years that prices countrywide have risen faster than London.
As expected, the London market is being hit by the upcoming election with factors such as Labour’s proposed ‘Mansion Tax’ putting buyers off investing until after the outcome.
However, looking at the longer term picture, the CEBR said that underlying factors such as economic growth and lack of housing supply will see prices rise again.
Nina Skero, a CEBR economist and the author of the report, said: “Outside of London, the outlook for house prices this year has improved after a few months when the market appeared to be coming off the boil. December’s stamp duty changes, as well as rising household incomes, are lifting prices in many parts of the UK.
“In London, however, we expect prices to decline by 3.6%, driven by a significant weakening at the prime end of the market. A potential mansion tax, reduced overseas interest and hefty new stamp duty rates have hit demand for high value property.”
During the last year, property in the UK rose by 10% and as 2014 drew to a close the effect began to ripple out from London and to other areas across the country. London also suffered from a lack of new buyer enquires and properties taking longer to sell.
Additionally, a decline in overseas interest in UK property will hit London harder than other areas of the UK.
Richard Carr believes that the market in London has gone into a cautious mode because of the threat from the “The Socialists” of Annual Property Tax and Non Domiciled Tax Status being changed drastically, if they were to gain power in May.
The fact remains that there is still a real threat that they could succeed in being elected, he is pretty sure that Nicola Sturgeon is going to see to it that a Conservative Government will be in the driving seat by default.
If he is correct, the London Market will breathe a sigh of relief and will get back into gear. The other point in question is that the Russian crisis has receded and the rouble is making a steady recovery which will help confidence return from the east.
With regard to the rest of the country, the biggest issue for buyers are the very stringent mortgage regulations, and it is about time that a lender took a new approach and came forward with a new product that was perhaps linked to the property for a longer period of 40 years – after all is that not why fractional banking was invented?
The market outside of London and south of ‘Hadrian’s Wall’ will be very buoyant if a Conservative Government continues, but the uncertainty that ‘The Socialists’ create is bad for all who are in work and for those who are thinking about buying as job security becomes a thought?
Again, we then come to the issue of building enough new homes which all parties have suggested. However, Richard believes that will only be possible if for a three year period all Developer Taxes (CIL, Section 106, Social Housing) are suspended therefore enabling marginal sites to be promoted for planning, and for LPA’s to be fined and pay costs for Planning Appeals that are later upheld. Then we will really see some traction in the market at the supply end!