27 June Market Update: How will the General Election results affect the Property Market?
The UK property market has been buffeted by strong headwinds now for a number of years. It started with the unexpected and penal Stamp Duty hike in December 2014, the long general election campaign in 2015, a further 3 percent stamp duty hikes on second homes and increased taxation on buy-to-lets in 2016, followed by the Brexit referendum and result, and now finally, an unexpected election outcome this year leading to a hung parliament.
In the light of increased taxation on property and substantial economic and political uncertainly, it is surprising how well the property market has held up in terms of pricing, even if the volume of transactions have fallen dramatically in some areas.
Despite all the doom and gloom expressed about the property market, according to the Office for National Statistics (ONS) average house prices in the UK increased by 5.6% in the year to April and in some parts of the UK growth was even stronger; the average house price in Scotland surged by £8,000 in April. PwC have predicted a price growth of 2-5% in 2017 as a whole.
The average cost of a home in the capital rose just 3.7% in the year to February 2017. As always averages should be viewed cautiously as this masks wide variations between boroughs (as displayed in the interesting interactive chart: http://www.standard.co.uk/news/london/london-house-prices-property-market-takes-hit-with-slowest-price-rise-for-five-years-a3512421.html).
It is against this backdrop the election results should be viewed. This can be seen to have both positive and negative factors on the property market:
- Most commentators believe that the current hung parliament will lead to a softer Brexit, with a higher chance that the UK will remain part of the single market and the customs union. This would be good for the economy and particularly beneficial for London’s financial industry and the central London market.
- Sterling has weakened further, which will continue to underpin the attractiveness of UK property prices to foreign investors and buyers and enable them to purchase with a favourable exchange rate.
- Uncertainty and political instability. This may cause buyers to stay out of the market
- Higher inflation and lower wage growth – weak sterling increases importing costs and adds to the pressure on inflation.
- Interest rates may rise more quickly than expected due to increased inflation – 3 out of 8 members of the Monetary Policy Committee recently voted for a rate increase. Inflation is at 2.9% and expected to rise further.
No one can pretend that currently the market is anything other than a buyer’s market – however the composition of the government, providing it can remain stable (if not strong) has not dramatically affected the prospects for the property market given the other more important factors and the fundamental shortage of housing stock in the UK.
At Walton Estates, we have seen several of our properties go under offer in recent weeks. We are optimistic that there will continue to be a good market for properties that are sensibly and accurately priced.
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