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Optimism and confidence returns to prime central London property sector
Optimism and confidence are returning to the prime central London property market after a long period of hesitancy amongst both purchasers and potential vendors in the run up to the general election, the latest research suggests. Viewings, offers, and sales have increased since 08 May across all sectors of the market and enquiries from both international and domestic purchasers have increased, particularly from the Middle East, according to W.A. Ellis, part of the JLL Group. The firm reports that in broad terms, capital values within the prime central London market fell during the first quarter of the year as the prospect of a Labour Government slowed the sales market and the level of transactions declined by as much as 30% in some sectors, with the number of house sales declining most significantly. ‘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%,’ said director Richard Barber. ‘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 reforms of late 2014. This still hangs over the upper end of the market and still restricts transaction levels and potential capital growth,’ he explained. ‘Whether the decision to raise SDLT to 12% on the proportion of a purchase over £1.5 million 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,’ he pointed out. He now hopes that the ‘politicising’ of the market will cease and the Government can address genuine issues. ‘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 five years at circa 2%, is as good as it will get, and one should act swiftly to obtain these short term offers,’ said Barber. He also mentioned the shortage of suitable housing for older people that is keeping home owners stuck in properties worth £820 billion and leaving £7.7 million spare bedrooms empty. Recent research suggests that almost a third of home owners over the age of 55 have considered downsizing over the past five years, yet only 7% have actually done so. ‘It would seem obvious 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… Continue reading
Surge of new home sales in the US due to demand outpacing supply
New home sales in the United States surged in April and they are selling quickly as not enough are being built to meet demand. Specifically, new home sales rose 26% from one year ago in April to an annualised pace of 517,000 annualised pace, the third highest monthly activity in eight years, according to data from the National Association of Realtors. The data also shows that the median price was $297,300, which is 8.3% above last year’s price and on average it took four months to find a buyer. The gap between new home price and existing home price still remains very wide, however, and according to Lawrence Yun, Nar chief economist, it implies that existing homes provide a relatively better bargain in relation to newly constructed homes. ‘Even though new home sales are rising strongly in percentage terms, they are only at about half the activity as during the bubble years nearly a decade ago. This implies, first, that today’s strong activity is not likely to be a bubble. Second, there is more room to grow,’ Yun explained. He also pointed out that the median number of months to find a buyer of new homes remains near historic lows. ‘Given the low supply of both existing and new home inventory, as evidenced by low months supply of inventory, there is zero concern over any over production,’ he said. For the year as a whole, new home sales are projected to rise by about 30% in 2015 and then another 20% to 25% in 2016. ‘It’s a good time to be a home builder. If only the banks would make more construction loans or, depending upon your point of view, if there were less financial regulations to permit banks to make more construction loans,’ Yun added. Continue reading
Long term outlook for UK prime country market looking positive
The long term outlook for the UK’s prime country property market is positive, but the election result is unlikely to lead to significant price growth, according to a new analysis. The result of the General Election has marked an end to the uncertainty experienced in the UK prime markets in the run-up to polling day, when concerns about taxation and personal finances led to weaker demand at the start of 2015, the Knight Frank report points out. Indeed, it shows that annual price growth had slowed to 2.5% by March, down from 5.2% in the second quarter of 2014 but prices have risen by nearly 1% so far this year and by 2.5% annually. ‘We now expect there will be more positive trading conditions as buyers and vendors return to the market. Transactions, which had been put on hold pending the outcome of the vote or as a result of a wider sense of political uncertainty, will proceed,’ said Oliver Knight of the firm’s residential research unit. However, prices remain below peak levels, creating an opportunity for buyers and prime market activity has picked up over the last 12 months,’ the report also says. ‘With a Conservative Cabinet, the possibility of a mansion tax for properties valued at over £2 million has gone. Now, one of the key questions is what effect a more certain political environment will have on prices,’ explained Knight. ‘While the confidence engendered by political stability is expected to result in a rise in market activity, any expectations that prices will jump significantly as a direct result of the general election may be unrealistic. ‘Any market is based on supply and demand and the number of new properties coming to the market is expected to increase. This rise in supply, together with uncertainty as to the precise direction of fiscal policies of the new government is likely to mitigate significant price rises,’ he pointed out. ‘Additionally, higher purchase costs as a result of the increase in stamp duty announced in December need to be considered. As a result of that change, the up-front cost of buying a property valued at more than £937,500 has risen,’ he added. The report says that overall the long term outlook for the prime country market is positive as for now interest rates remain at record low levels, economic growth is steady and mortgage rates are competitive. ‘As the economy continues to improve the ripples of demand from London will strengthen. Popular commuter locations, within easy reach of the capital, are likely to be the biggest beneficiaries,’ said Knight. ‘There has already been an increase in the number of buyers looking to exploit the relative price gap that has opened up between London and regional prime markets and the expectation is that this will continue,’ he concluded. Continue reading
