Will recovery fall victim as the coalition wields financial axe?
Have broken election promises and gloomy Con Lib forecasts for future austerity affected the property market? Weask the experts.
Martin Ellis, Halifax Chief Economist. “There are signs that the market is slowing and we expect prices to be flat this year and to remain so for the next year or two. I don’t think there will be any sharp dips.
In terms of proposed capital gains tax increases I think the impact will be modest. It will encourage some people to sell properties and that may dampen the market a little but it will probably be a return to the CGT system we had a couple of years ago. People who bought in the last five years won’t have made much capital gain and those who bought well before that are probably in it for the long-term.
Mortgage lending will remain tight over the next one to two years but interest rates should remain at low levels. There might be a rise but it will be modest.” Andrew Beadnall, of Beadnall and Copley estate agents “Confidence came back to the market in the first quarter of the year partly because a change of government was on the horizon. We saw a similar uplift in 1997.
But we got an election result no-one expected and we have a Conservative party reneging on their promises on taxes.
A lot of wealthy clients with second, third and fourth homes have been on the phone in droves asking for valuations as they are thinking of off-loading them before the 50 per cent tax band starts and capital gains tax rises from 18 to a possible 40 per cent.
Confidence has been knocked at the lower end of the market, too, and the only sector that is seeing a lot of activity is the £250,000 to £500,000 midmarket as they have equity, are generally unaffected by the 50 per cent tax band and don’t have a portfolio of properties.
As for house prices, I believe they will stay level this year.” Stewart Charnock-Bates, of Charnock Bates, Calderdale. “My immediate reaction to the General Election result is one of great delight as the result has meant that Home Information Packs have been suspended immediately. This means it is business as usual with regards to the speed of placing a property on the market for sale with little extra cost, apart from the requirement of the Energy Performance Certificate.
The result of this has been more properties coming to the market which gives buyers greater choice.
I suspect there will be changes to VAT and capital gains tax which may have some impact but I am of the opinion that the property market is now resilient enough and past the worst in these recessionary times.
Calderdale has reacted positively over the last 12 months to market improvements and with improving communication links and a direct rail link to London I can see the area progressing even further in the future.
I would anticipate a stable 12 months as the new Government imposes inevitable tax increases and cost cutting, but after this I can see steady growth.” Nick Talbot, partner at Carter Jonas. “There has been a feeling of frustration over the last 12 months with a lack of new property coming to the market. However, this has started to change throughout the region and we have seen a marked increase in activity. This has been helped by the recent abolition of the dreaded HIPs along with mortgage lending starting to ease slightly.
With things now settling down post-election, focus has turned to what will happen in the forthcoming Budget, in particular capital gains tax, VAT and interest rates in the longer term. On a positive note, the recent stamp duty holiday for first-time buyers looking up to £250,000 and the increase in the top rate to five per cent from April 2011 could encourage both first-time buyers and buyers towards the top end of the market to take advantage of these changes, particularly towards the end of this year.
The increase in property becoming available has helped to relieve upward pressure on prices and we would expect these to remain stable for at least the rest of this year.” Andrew Wells, of property auctioneers and valuers Allsop. “Looking at it nationally rather than regionally, much of the recovery has been driven by London and the South-East. The buoyant London market has inevitably tended to distort media coverage and to a lesser degree the Halifax and Nationwide house price indices. Here in Yorkshire, while it’s fair to say there is a good market for some types of property and location, there are many wouldbe sellers who are still finding it difficult to entice buyers and there is little in the way of competition for purchase.
Properties most in demand are quality family homes in commutable locations. Most difficult to sell are traditional terraced houses. With continued difficulty for first-time buyers accessing reasonable mortgage terms, it is the bottom end of the market that is slowest. It is encouraging to see that housebuilders are buying land again – always a good sign that confidence is returning. Land prices have adjusted to affordable levels and many local authorities have moderated their demands for affordable housing, financial contributions and other goodies. However, banks are still far from enthusiastic about lending to the development sector and this will constrain new home supply for the foreseeable future.
Our May auction did see some last-minute entries from buy-tolet investors keen to offload before any CGT changes come into effect and enquiries for July auction entry are very busy. We are not seeing much of an increase in selling activity here – primarily because tenant demand is strong and landlords are content to collect rent. The irony is that the growing tenant pool supporting this investment sector comprises mostly the would-be first-time buyers who are absent from the sales market.” Kevin Hollinrake, of Hunters estate agents. “World Cups and General Elections are never good for the housing market so we were expecting a quiet market in the first half of 2010 and so it has turned out. Instructions have been good, 50 per cent higher than the same period last year, but sales have been more difficult with volumes on a par with 2009.
The biggest issue we have is the mismatch between seller and buyer expectations on price. A good house, well priced will always sell well in all parts of the market and wise sellers are being more realistic about the market and hence their asking price.
We have definitely seen renewed confidence and increased activity since the coalition was formed and we expect that to continue. The banks seem to be gradually becoming less tight-fisted with their lending which has been the primary issue all along.
Let’s hope things continue in the same vein and then start to gain momentum after Rooney scores the winner against Brazil in the final.” Jonathan Morgan, of Morgans City Living, Leeds. “While most people would hate to admit that a trivial, external event such as a General Election might affect their decisionmaking process, there is little doubt that an irrational fear of the unknown did hold some people back from the property market. The full impact of a change of government will only unravel after the emergency Budget on June 22 when radical changes to tax regimes are likely.
Talk of a big increase in capital gains tax is on the cards. Fears of a mass property sell-off in reaction to this spectre were wildly reported, but it makes no sense to most investors to dispose of an asset which is more likely than not well rented, in a market where a ready buyer is unlikely, purely to mitigate a potential future tax position.
It is more likely that property investors will continue to manage their investments with a medium term perspective, take good income while it is available and plan their exit from the market according to their own circumstances.
Post-election, the city centre market looks pretty much as it did before hand. Rentals predominate with stock in very short supply. With very few new apartments coming to the market, demand is beginning to exceed supply and we are seeing modest rental growth as a consequence. New sales are in line with 2009 – flat – and this will remain the case until such time as unfounded claims of over-supply finally fade away, and mortgage availability increases dramatically.
Occupancy levels are, we estimate, at record levels, with around 95 per cent of the available apartments currently occupied.”
Ben Pridden, of Savills, York. “The election really has not affected our markets specifically yet. May was a strong month, the York office agreed the sale of 10 houses. The Budget is of far more relevance and changes regarding capital gains tax (CGT) will affect many clients,
The market is getting polarised between good houses and those just missing the mark. Blue chip stock is, in some cases, selling for 2007 prices. I have noted a particular hunger for houses to the north of York in the Howardian Hills and near Ampleforth. In recent weeks, we have had two instances of competitive bidding. My prediction is that momentum will carry into the early autumn, beyond that, things may become a little tougher.” Patrick McCutcheon, head of residential at Dacre, Son and Hartley. “I think an air of caution remains. The Government is painting a dark picture of what is to come in the Budget, and one can only hope that this is down a degree of political posturing and the reality wont be as bad as some fear. Some buyers are now sitting on their hands pending the June 22 – conversely, others are happily buying, especially in the upper sectors.
Prices remain steady. So far as capital gains tax is concerned, I do not see this as having a major effect; there are some who say that any increase will lead to a flood of holiday homes coming to the market – I just don’t see that. Owners will retain and deal with the liability at the time of natural disposal. House prices will remain static for the short term.” Tim Waring, head of residential for Knight Frank in the North. “‘Interesting’ is possibly the best definition of the current market place. It would appear some potential purchasers are holding back from making a commitment, perhaps waiting to see how the economy performs in the light of the forthcoming emergency Budget.
That said, sales are happening where buyers, sellers and valuers are all taking a pragmatic and sensible position on what a property is worth. Talk of a double dip is not helping general confidence but then we have purchasers who are frustrated that they cannot find the right house to buy. The suspension of Home Information Packs is already leading to an increase in the number of houses coming to the market. However, realistic pricing remains essential if the marketplace is to continue to function.”
THE AXEMEN: Prime Minister David Cameron and Treasury Chief Secretary Danny Alexander set out the austerity agenda.
From left, Andrew Wells of Alsop, Kevin Hollinrake of Hunters, Jonathan Morgan, Patrick McCutcheon of Dacre, Son and Hartley and Tim Waring of Knight Frank.
From left, Martin Ellis of Halifax, Andrew Beadnall, Stewart Charnock-Bates, and Nick Talbot of Carter Jonas.