In 2016, house prices in the rest of the UK grew by 4.5% while in London the same figure was 3.7%. This marked the first time since 2008 that the average growth in London was below that of the UK average according to the National Building Society.
Despite this, there is still no guarantee that there are bargains to be had for those looking to buy property in the city. This is exemplified by the case of one development in Battersea where eight apartments will be going into the market in February. Each of the apartments will be going for a dizzying £3.65m. For a three bedroom home, this price tag will look insane anywhere else in the UK. Even more surprisingly, the property developers believe that these houses will be the sort of thing those looking to downsize will be looking for. These are typically people in their 50s and 60s who already own homes in Central London. As shocking as all this may seem to others, Banda Property’s head of search says that this price tag is very realistic because of the high appeal the city has. This is all the proof you need to know that the housing market in London is not in sync with that of the rest of the UK.
The introduction of the stump duty surcharge is what experts believe is behind the slump in Central London’s housing market. The surcharge has effectively raised the rate for properties going for £1.5m and above to 15% if they are buy-to-let or if they are a second home. The introduction of the surcharge resulted in a rapid reduction in transactions from April 2016 and things haven’t been the same since according to RICS’ chief economist, Simon Rubinsohn. A similar rate increase was also passed in Scotland.
Changes in Prices
Experts are now saying that the stamp duty surcharge has had a bigger impact on the housing market than the Brexit referendum. According to the chief property economist at Capital Economics, Ed Stansfield, although the market dipped immediately after the vote, it quickly rose again afterwards. At the high end of the market, many homeowners decided to extend their homes rather than move according to Ray Boulger of John Charcol Mortgage brokers and this even had an effect at the lower end of the market.
Stansfield stated that buyer caution and uncertainties over the economy helped to keep prices low as buyers were wary of overspending.
One reason why prices are still rising according to experts is the fact that fewer houses are now coming to the market. This will likely be a problem for many first time buyers and many will still rely on their parents’ help when purchasing their first home. Other experts, however, believe that first-time house buyers may actually help to keep the market alive as long as the government continues to assist them through Help to Buy projects and changes in taxation.
There are many different predictions on whether house prices will rise or fall but many experts agree that those who already own homes are probably in a better position this year than those who don’t own homes.