January 13th, 2015
Market experts are forecasting marginal reductions in property values across the country in 2015, led by the continuing stutter in activity in the capital. During 2014, the London market spurred the resurgence of property value increases across the UK, with average for the country sitting at 8.8 per cent by the end of the year. Savills estate agency confirmed yesterday that the total value of property in the UK rose to £5.75 trillion over the past five years, noting that values in London had increased by 61 per cent during the same period.
Although this is all very much a cause to celebrate for anyone owning property in the capital, or the south east to some degree, it became apparent towards the end of 2014 that the London market was beginning to slow down. Savills were quoted in November last year predicting that the potential mansion tax mooted by Labour and the government would have a negative impact on the capital.
It has often been noted that the Financial Conducts Authority’s Mortgage Market Review affected the market to some degree in 2014, and many experts still feel there will be a residual impact in 2015 as buyers come to terms with the changes. Simon Butler, a Senior Mortgage Consultant for Contractor Mortgages Made Easy, said: “One adjustment that the MMR process brought forth was the reduction in lending multiples applied by the Lloyds Banking Group. This had a significant effect on the London market, where the requirement for a stretch in income calculations has historically been required, due to higher property prices.”
The reasoning Lloyds gave to support the reduction was that the London market needed to be managed, with fears abound that property prices were spiralling out of control. Lloyds Banking Group still remain under the wing of the Government, and many market experts cited pressures from the Treasury for one of the UK’s biggest mortgage lending groups to set an example for the rest of the sector.
The Centre for Economics and Business Research was quoted earlier this month forecasting a reduction in property values in the capital of 3.3 per cent. The CEBR also pointed to the mansion tax policy, but referred to the reluctance of foreign investors to continue buying in the UK as a major factor in their view of the market for 2015. One of the most prominent concerns is that the ailing economic fortunes of Russia would lead to less of an influx of investors in the capital, as many wealthy Eastern Europeans feel the impact of dwindling oil prices.
An economist for CEBR, Nina Skero, said: “The uncertainty surrounding May’s election, proposed changes to property taxation and reduced foreign demand are already bringing down house prices. Subdued price rises or modest declines also reflect a correction in the housing market after a period of very strong price growth.”
The feeling of a change in fortunes for the housing sector is, however, not predicted to filter through to the rest of the UK housing markets. The recent change to stamp duty has buoyed interest in property, and the Royal Institute of Chartered surveyors positively predict that the UK will see an overall increase of 3 per cent on property values in 2015, with Halifax stating anywhere between 3-5 per cent. The opinion of CEBR is that the average property value in the UK will begin to be far stronger once the figures for London are removed from the equation.
Article By: Ratchelle Deary, Marketing Executive at Contractor Mortgages Made Easy
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