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Brexit Impacts London Investment Property Prices

London house prices are likely to fall this year as Brexit impacts demand, according to a poll of housing market specialists conducted by Reuters.

Property prices in London could fall by an average of one per cent this year, marking the first annual dip in nearly 10 years, according to a poll of 30 experts. However, prices are expected to bounce back in the coming years.

The survey suggested that house prices could rise an average 1.7 per cent across Britain in 2018, before falling again with inflation. A 2.5 per cent consumer price rise is expected too.

Next year, growth in house prices is expected to pick up, with a rise of two per cent nationally predicted. A smaller rise of 0.5 per cent is expected in London. By 2020, it is thought that house prices will increase by two per cent both in the capital, and in Britain.

Reuters found a range of forecasts for London, noting predictions ranging from a six per cent fall to a 2.5 per cent rise.

Associate at estate agency Knight Frank, Oliver Knight, attributed much of the uncertainty ‘as to where we are with Brexit negotiations’. He said: ‘That has really kept a lid on further growth. There is a wait-and-see attitude.’

Brexit-related uncertainty may have reduced the appeal of the capital for overseas buyers, with a decline in demand for property in London also attributed somewhat to reductions in mortgage interest relief.

Brexit may have reduced the appeal for overseas buyers, according to the ONS, while falling demand for property in London could also be partly attributed to reductions in mortgage interest relief.

The ONS commented ‘With the referendum and subsequent uncertainty regarding Britain’s political and economic environment, perceptions of the future value of London property have been adversely affected. This is what you might call a fall in ‘speculative demand.’

Source: Residential Landlord

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Over half of London properties to be priced out of stamp duty relief in 10 years

Over half of the 52,002 properties that currently qualify for a stamp duty relief for first-time buyers in London will be priced out of the tax cut in the next ten years, according to mortgage adviser L&C Mortgages.

The company looked at how many homes across England are and will be available for under £500,000 by 2028, and therefore qualify for the Government’s first-time home buyer’s relief.

The research shows that as many as 4m homes across England could move out of the stamp duty relief threshold in the next 10 years due to rising house prices.

In London, the total proportion of properties that would benefit from the stamp duty cut will drop from 57 per cent to 28 per cent by 2028.

The study also found that London has a relatively low proportion of properties within the band eligible for a cut, primarily because just over two fifths of sales are over £500,000 and therefore not applicable for the stamp duty cut.

In Brighton, almost a third (30 per cent) of properties that could currently be eligible to pay less stamp duty are forecast to move above the threshold in ten years.

However, homes in Nottingham are the most likely to remain within the price bracket for tax exemption over the next ten years.

The research also found that Southampton, Norwich, Bristol and Plymouth are currently the best places to buy to avoid stamp duty.

City Houses below £500,000
Southampton 88 per cent
Norwich 87 per cent
Bristol 87 per cent
Plymouth 80 per cent
London 57 per cent

According to the research, Nottingham will have the most houses within the price bracket for tax exemption over the next ten years.

David Hollingworth from L&C said: “It’s alarming that in cities in the South, so few properties will see any type of benefit from the stamp duty changes in 10 years’ time.

“Our research shows that many of the first-time buyers, especially those based in southern England, who are set to pay less or nothing will need to act fast before many of the properties currently eligible fall out of the price bracket that qualifies for the cut.”

The research also found that almost a third of first-time buyers don’t know if the stamp duty abolition will benefit them when they buy their first home.

However, a fifth of first-time buyers have changed the area in which they want to buy in order to pay less or no stamp duty, which rises to 37 per cent of Londoners.

James Hender, head of private wealth at Saffery Champness, said: “The research shows that people are aware of the stamp duty relief and are changing behaviour to benefit from the savings.

“House price inflation could render this relief meaningless. Although higher stamp duty receipts would be the result, a future Chancellor may wish to raise the thresholds to ensure that first time buyers continue to get a helping hand onto the property ladder.”

Source: City A.M.

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London home buyers receive more help from parents than in any other region

More buyers in London receive help from their parents to buy a home than in any other region, with residents of the capital also having the highest parental contributions – almost £31,000 per transaction on average.

Young people across the UK are set to increase their reliance on their parents to buy house, with the the “Bank of Mum and Dad” set to reach nearly £6bn this year, according to research released by Legal & General and the Centre for Economics and Business Research (Cebr).

The so-called Bank of Mum and Dad will be the equivalent of a £5.7bn mortgage lender in 2018, according to the research.

Family-supported lending remains a major force in the UK housing market, the firm said, with 27 per cent of buyers set to receive help from friends or family in 2018, up from 25 per cent in 2017.

This year, the Bank of Mum and Dad will help 316,600 relatives buy a home – up from 298,300 in 2017.

The value of Bank of Mum and Dad-supported property purchases in 2018 will rise to £81.7bn, according to the research, representing a five per cent increase since 2016.

However, parents are providing smaller sums, with the average contribution declining from £21,600 in 2017 to £18,000 in 2018.

Nigel Wilson, group chief executive at Legal & General, said: “The fact that in 2018, 1 in 4 housing transactions in the UK will be dependent on the Bank of Mum and Dad, while hard-pressed parents are finding it more difficult to provide the funds to help their family with deposits, will further exacerbate the UK’s housing crisis.

“We need more homes for the young, old and families alike.”

Under 35s are the most likely to receive parental assistance, with nearly 3 in 5 receiving money from family and friends to buy a property, according to the research.

By comparison, just eight per cent of over 55s receiving family assistance to buy a home. However, 20 per cent of homeowners aged between 45 and 55 are now relying on family help to buy a home.

“The volume of transactions depending on Bank of Mum and Dad funding keeps on growing, even as parents find it harder to provide as much money for the deposit,” said Wilson.

“Bank of Mum and Dad funding is a vital plank in the housing market, but this year the supply of funds is being squeezed.”

Source: City A.M.

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Despite slowing in property market, prices surge for prime London homes over £2m

Homes sold for £2m or more in prime areas of London over the last three months have seen prices rise 3.2 per cent from the same period a year ago, according to data from property group Lonres.

However, homes sold for under £2m saw prices fall by 5.8 per cent, compared to the first quarter of 2017.

This reflects a reversal in fortunes for these two segments of the market: two years ago homes sold at £2m or more recorded annual falls of 5.5 per cent ,compared with growth of 4.4 per cent for those priced under £2m.

Marcus Dixon, head of research at Lonres said:

“Homes sold below £2m, recorded the most significant prices falls, as the wider London housing market slowed and fewer investors entered the market.

“This contrasts with the market above £2m. Demand for these properties appears to be increasing, prices having fallen earlier and buyers, many of whom are owner-occupiers, have begun to see value, even with Brexit uncertainty still looming.”

According to Becky Fatemi, managing director of London real estate agency Rokstone, the increase in prime real estate prices comes down to continuing high demand in London’s luxury areas.

“Mayfair and Marylebone is where everyone wants to be, so prices are going to be stronger,” said Fatemi. “I had 16 properties in the W2 postcode last year, now I’ve got two.”

Peter Wetherell, who runs Mayfair-based agency Wetherell, has seen a similar increase in demand for high-end properties, and as a result, prices in the area have remained strong.

“Mayfair has bucked the trend,” says Wetherell. “Whereas everyone else has plateaued, we’ve kept growing. We’ve taken the crown back from Knightsbridge.”

Still, overall prices across prime London fell by an average of three per cent compared to the same period last year, even though the number of transactions increased by three per cent, with the market for homes over £2m continuing to see the most activity.

According to Wetherell, this overall slump in the prime London market is due to a large extent to the government’s stamp duty, which has dampened the market beyond even their own expectations.

“They’ve done what they wanted to do, they’ve taken the heat off,” said Wetherell. “The problem is they turned on the cold water tap too strong.”

Meanwhile, according to the Halifax House Price Index released today, prices across the UK have fallen by 3.2 per cent in the first three months of the year.

Source: City A.M.

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Why are luxury property prices in London falling?

There were only 369 houses sold for £5 million or more in the UK last year, down 15% on 433 sold in 2016 and down a third on 545 in 2014, shows research by Lendy, one of Europe’s largest peer-to-peer secured lending platforms.

Lendy says that these super-prime property sales were worth £3 billion last year, falling from £3.7 billion in 2016 and £4.7 billion in 2014.

The property platform explains that key drivers of the fall in luxury home sales are likely to include a slowdown in purchases by overseas high net worth individuals since the Brexit vote, and banks becoming more cautious in lending, even to the wealthiest individuals.

Lendy says that since the Brexit vote, non-UK high net worths (HNWs) have started to turn more cautious on super-prime residential property. Some are choosing to put investment plans on hold until the Brexit process is complete, or instead purchase larger portfolios of lower-value property.

Lendy adds that banks have also become more cautious on their lending to high net worth individuals, with even private banks instituting more stringent lending criteria and reducing LTVs. This has made it more difficult to obtain the multi-million pound mortgages needed for super-prime purchases.

The property platform says that the London boroughs of Kensington & Chelsea (118 sales) and Westminster (111 sales) remain the most popular locations for super-prime residential purchases. 62% of all £5m+ purchases in 2017 were located in just these two boroughs.

These areas were followed by the London boroughs of Camden (44 sales) and Barnet, home to The Bishops Avenue, known as London’s Millionaire’s Row (14 sales). Fifth is Elmbridge in Surrey, which has become known as ‘Britain’s Beverly Hills’ (10 sales).

Liam Brooke, co-founder of Lendy comments: “Super-prime residential properties have definitely seen a slowdown in just the past 12 months, with overseas investors keen to see what Brexit will look like, and what effect it will have on the market.

“Private banks have also tightened up their lending criteria for high net worth investors. A £5 million mortgage isn’t as easy to come by as it once was, even for investors with very substantial wealth.”

Source: London Loves Business

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Putting the London housing market in perspective

Over the last few months there has been intense speculation about the short to medium term direction of London house prices. Brexit has been used time and time again to batter the market and decimate investor confidence. While in reality London is a separate market to the rest of the UK this is not something which is always recognised by those looking at attention grabbing headlines. So, how does the London housing market compare to the rest of the UK?

LONDON HOUSING NOW WORTH £1.5 TRILLION

A recent report by Zoopla will surprise many people confirm that London is not only head and shoulders above the next largest city but the next nine largest cities. Yes, London housing is now valued at around £1.5 trillion while the next nine largest cities in the UK have a combined housing value of £678 billion. So, London is worth literally more than twice the combined value of the next nine largest cities in the country!

To give you an example, Bristol is the second city on the list with homes worth around £115 billion, around 1/13th (£115.21b) of combined London house values. Sheffield, which is number nine on the list of largest cities in the UK, comes in with a combined house value which is 1/27th (£55.67b) of the combined London value. It is difficult to appreciate how large the London housing market is, in terms of value, compared to the rest of the UK. London literally is a market within a market.

SCOTLAND CATCHING THE EYE OF INVESTORS

As we touched on above, London is literally head and shoulders above the rest of the UK when it comes to property values. However, it was interesting to see that Glasgow, second on the highest growth list with a value of £90.75 billion, saw prices increase by 5.4% last year. Edinburgh, in sixth place, has a combined value of £68.27 billion which is significantly less than Glasgow, something which will surprise many people. Could the Scottish housing market be turning? Are people seeing a potential Scottish independence referendum, in the short to medium term, as more positive than ever before?

In many ways Scotland has become something of a political football with Westminster and the Scottish government constantly at loggerheads. There were concerns that the Scottish economy was struggling as both parties took their eye off the ball, but recent information would suggest that the Scottish economy is starting to pick up again. There is no doubt that the crash in the oil price just a couple of years ago had a massive impact on areas such as Aberdeen, with a very strong oil and gas industry, but the price is starting to recover which will assist the overall Scottish economy.

TAKING LONDON OUT OF THE EQUATION

When you bear in mind the size of the London housing market, especially when compared to the rest of the UK, constant comparisons between the two have relatively little value. London is literally an economy within an economy and a property market within a property market. Perhaps we should start quoting UK house prices excluding London to give a fairer impression of values and trends?

Source: Property Forum