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London property set for flat election year

Posted by: In: Real Estate 10 Nov 2014 Comments: 0 Tags: , , , , , , , , , , ,

What goes up must come down? Photo: Martie1Swart

A new forecast from Savills predicts that London property prices will grow 15 per cent in 2014, up from its earlier prediction, but that values will then stay flat in 2015, as concerns surrounding the election and a potential base rate hike cause caution among buyers and sellers.

Lending restrictions are also expected to impact upon demand. Growth will then resume, adds Savills, forecasting an overall rise in value of 10.4 per cent to 2019, behind a projected 26.4 per cent growth in the South East and an overall UK growth of 19.3 per cent.

The ability to predict the path of the market, though, is harder than ever at present, something Savills acknowledges.

“Forecasts can often say more about the time in which they are made rather than actual future outcomes,” starts the 16-page report, “but, at their best, they contain vital thinking and information reflecting current and likely near-future market risks.

“It is telling therefore that politics feature centre stage in this forecast issue.”

Indeed, as Savills notes, housing has “rarely been higher on the political agenda”, with the UK’s chronic housing shortage causing prices to rise and a wave of young buyers unable to get onto the property ladder. Government measures such as Help to Buy, to encourage new homeowners, and the Mortgage Market Review, to restrict lending and prevent a bubble from over-encouragement, have seen the UK market race and slow down in the past 12 months to varying degrees in each region. With the election set to determine a major factor in current market sentiment – the introduction of a “mansion tax” – the policy that could shape future activity is still unclear.

Closer to home, though, Knight Frank’s latest report presents a similar picture of London’s real estate, based on concrete past data: according to Knight Frank, prime London property prices have already flatlined: there was no rise at all in October 2014, ending a four-year period of unnterrupted growth.

Values decreased 0.2 per cent in October, the first fall since May 2011 – a staggering 40 months ago. As a result, annual growth slowed from 11.8 per cent in September 2014 to 10.1 per cent, although it still remains higher than October 2013’s annual growth of 8.4 per cent.

“The positive run began in November 2010, the same month Ireland became the second European country after Greece to receive a bailout as concerns grew over the future of the eurozone,” explains Knight Frank.

Ireland has since left its bailout programme, notes the agent, with political concerns replacing previous economic drivers, causing prices to adjust to more subdued market conditions.

“It is worth emphasising the gradual nature of the slowdown, which is typical after such a strong run. Furthermore, the fact monthly growth reached zero in October is in line with a forecast we made more than a year ago. While we expect zero growth in central London prices throughout 2015, if the prospect of a mansion tax recedes after May, we could see modest positive growth in the second half of the year.”

Knight Frank forecasts growth in prime outer London will slow to 3 per cent next year. Beyond 2015 is anybody’s guess. For now, though, one thing is certain: London’s boom has been dimmed.

UK, House Prices, London property

Source: The Movechannel


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