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Consultants say anti-London political rhetoric is harming the city’s property markets
The uncertainty fuelled by this week’s general election on the London housing market is unparalleled and has resulted in a near flat lining of performance in both the sales and lettings markets, it is claimed. The situation is having a stifling impact on the ability of vast swathes of the capital to retain any momentum, according to leading international real estate consultant Cluttons. While the behaviour of the residential market mirrors what has been seen in previous election years, the anti-London political rhetoric has and is damaging the capital's real estate landscape, the firm says. ‘We are in the midst of one of the toughest forecasting environments in a long time. The likelihood of a hung parliament is just adding to the widespread election anxiety,’ said Cluttons' international research manager, Faisal Durrani. ‘Furthermore, the emergence of London as a scapegoat to win votes is having a damaging impact on the performance of the market, which could have ramifications for the rest of the country,’ he added. He explained that with nearly a quarter of the UK's GDP activity emanating from London, it is difficult to understand why the commercial nerve centre of the UK is being targeted, adding that proposals for a mansion tax has reignited the debate of whether or not London's property millionaires should be taxed, giving further momentum to the anti-London political rhetoric. ‘The mansion tax really is a tax on London and the South East, where almost 90% of the UK's £2 million plus properties are concentrated. Some 27% of the population resides in London and the South East and hard working families will feel the biggest squeeze from any additional tax on higher value properties,’ said Durrani. ‘The reality is that £2 million no longer buys you a mansion in London and hasn't for some time. Two bedroom properties in Shad Thames, St. John's Wood and Pimlico are all in close range of the £2 million barrier and will be netted by any new London housing tax well before the end of the next parliament. A smarter approach might be to make adjustments to council tax pay bands, which no party has been willing to look at,’ he pointed out. Among the Labour Party's housing policy initiatives is a controversial rental cap. The proposal calls for an effective freeze in rents for a period of three years, with CPI-linked increases allowed during this period. ‘In a deflationary environment, this is an easy promise to make, but what happens when inflation climbs above the level of rental value growth, or when rents decline? Our international experience tells us that rent caps are tough to police and artificially choke growth, creating unnatural cycles that are far removed from economic realities,’ Durrani explained. He pointed out that in Abu Dhabi a decision was taken last year to remove the emirate's 5% rent cap as it was artificially holding back the market and was far too broad-brushed and didn't really accurately… Continue reading
RICS develops policy ideas report for next UK government
With property a key issue for voters ahead of this week’s UK general election, the Royal Institution for Chartered Surveyors (RICS) has developed a series of policy blueprints for new ministers. These Property in Politics recommendations provide workable solutions for the next government to implement as priorities and include establishing an independent Housing Observatory and for the next government to issue Property Tax Forward Guidance within its first 100 days A Housing Observatory would draw on expertise from across government, the private sector and academia, taking politics out of the housing debate and ultimately delivering the housing supply the UK needs. RICS says that the observatory would be strictly independent at arm’s length from government and fulfil several functions including as a data hub on housing, accessible to policymakers, academics and the general public. It would review and interpret this data and produce briefing papers on what works, both nationally and internationally and analyse policy statements, identifying long term consequences and macro trends modelled on the tax and spending policy analysis carried out by the Institute for Fiscal Studies. It would also create or facilitate new streams of research. Property Tax Forward Guidance would promote certainty and clarity for the property sector, according to RICS and it added that the new government should publish Forward Guidance of its plans for property taxes within its first 100 days. It would seek a commitment to a comprehensive review of Council Tax, including moves towards a wholesale revaluation of properties and the introduction of higher rate bands and reduce the VAT on improvements to rental properties to 5% to stimulate investment in the private rented sector. It says that the parties should undertake a detailed assessment of the probable impact of a mansion tax proposed by Labour and the Liberal Democrats. The proposals were developed through in-depth consultations with RICS professionals, and to date over 1,000 people have been engaged on the campaign. ‘To take these ideas forward, we convened a series of working groups in early 2015, to develop clear plans for action on a number of the recommendations; principal among these were the establishment of a Housing Observatory, the issuing of Property Tax Forward Guidance within the first 100 days of the next government, and the delivery of a Resource Revolution in planning departments,’ said a spokesman. ‘Across each of these areas, we engaged with partners and stakeholders from the professions, from academia, and from government. Each panel moved beyond the headline recommendations to give concrete proposals on how each can be realised and their findings have been compiled in a series of policy blueprints for new Ministers,’ the spokesman added. Continue reading
Property prices and rents holding steady in the Gulf region
Residential property prices in Dubai have increased 1.5% year on year, led by villas, with apartment seeing prices grow at a slower rate, according to the latest index. Apartment prices increased by just 0.8% compared with a year ago in March but increased 1.74% month on month, the data from ReidIn shows. Villa prices were up 4.5% year on year but month on month fell by 0.24%. The data also shows that rental prices fell by 0.29% but have increased 5.4% year on year. A breakdown of the figures shows that apartment rents decreased 0.2% on a monthly basis but are up 6.3% year on year. Villa rents have been much more stable in the last 12 months, up by 1% year on year and down by 0.25% month on month. Meanwhile, in neighbouring Abu Dhabi prices fell by of 0.48% in March 2015 but were up 0.4% compared to March 2014. Apartment prices were down 0.60% month on month and decreased 1.8% year on year while villa prices fell 0.4& compared to February but increased 0.9% year on year. In the rental market prices fell 0.75% in March but are still up 2% compared to March 2014. Apartment rents were down 0.45% month on month and down 2.6% year on year while villa rents fell 1.04% month on month but are up 4.7% year on year. Elsewhere in the Gulf region the Saudi Arabian market has seen variable real estate performance. Over the past year, residential prices in Riyadh have risen by 5% to 7% overall but there have been variable performances across the capital’s districts, according to the latest report from international real estate firm Knight Frank. It says that congestion issues in the south, for example, have resulted in prices stagnating while in the north, which has seen notable development activity, prices have increased by around 9%. ‘In the short to medium term, with new supply unlikely to be able to fully offset pent-up demand, we expect residential prices to continue to move in an upward direction,’ said Stefan Burch, Knight Frank partner for Saudi Arabia advisory services. The report points out that in recent year Saudi Arabia’s residential construction sector has been expanding rapidly. Indeed, the latest available data shows that the value of residential building construction across the kingdom rose for the ninth consecutive year in 2012, increasing by 11.4% year on year to SAR95.6 billion. ‘Not surprisingly, Riyadh is an important driver of construction activity in Saudi Arabia. The capital accounted for an average of 27% of all residential and commercial permits issued across the kingdom between 2003 and 2013. Moreover, the number of permits issued in the capital rose by 319% over the 10 year period, outperforming Saudi Arabia as a whole, which experienced a 215% increase,’ explained Burch. Despite rising development activity however, demand for residential units continues to outstrip supply in Riyadh. Indeed, the capital has a requirement for around 50,000 housing units per annum… Continue reading
