The punitive stamp duty levels, and continuing economic and political uncertainty, has taken its toll on the property market this year and this is likely to continue until the UK fully understands the impact of the Brexit negotiations.
Higher value properties will continue to see selective demand in 2019 unless they have been priced competitively to attract buyer interest. The continuing mismatch between vendor expectations and the price that buyers are prepared to pay remains a barrier at the high end of the market. The middle to volume end of the market should fare better however, remaining more stable over the course of the year, but Jackson-Stops do expect to see overall UK transaction numbers remain low at around one million over the full year.
Nick Leeming, Chairman of Jackson-Stops, comments: “As we near the end of 2018, regardless of the outcome of the delayed Brexit vote or Theresa May having to face a vote of no confidence, these very public political uncertainties mean that the property market will start very slowly in the New Year.
The possibility of a second referendum would only prolong the uncertainty and infighting further and with every extra minute that passes while we are kept waiting on an outcome, the UK’s confidence dwindles.
The government now just needs to focus on getting the best deal possible and then we as an industry need to ride the wave until a greater number of buyers and sellers feel more confident moving in the market again. Should this be achieved, we can expect to see stability at the middle to volume end of the market and we could even see a modest recovery in house prices in London, with the ripple effect felt thereafter in outlying areas, but until a deal is agreed nothing is guaranteed.
Prohibitive levels of stamp duty land tax (SDLT) have of course not helped the market over the last year either. However, for what should have been HMRC’s most fruitful quarter for tax receipts, their 2018 Q3 stamp duty statistics show that the Chancellor may have missed a trick by failing to revisit second home stamp duty levels in the Autumn budget, with overall tax receipts for this market 9% lower than Q3 2017.
It is unlikely that any further reform to stamp duty will occur over the next 12 months but it would give the market the boost it needs during this uncertain time.”
London sales
With average house price growth in London remaining relatively stable over the last six months, Jackson-Stops expect this trend to endure, but this is largely reliant on the outcomes of continued Brexit negotiations. London has experienced no capital growth so far this year, but if a level of political and economic stability can be achieved between the UK and the EU, Jackson-Stops expect to see a modest recovery.
Robert Butterworth, Head of Research at Jackson-Stops London, comments: “At present, a significant amount of buyers and sellers in London are holding off on making decisions before firm agreements have been made. We expect to see transactions increase next year unless the Brexit deal is particularly bad, as it is often economic and political stability that guides both sale and purchase decisions for clients particularly in the central London market.
In this period of low capital growth, the effects of Stamp Duty Land Tax at the higher end and investment segment of the market have weighed heavily on activity. As such, it was disappointing that Stamp Duty reform was not introduced during the Chancellor’s Autumn budget. The government could have made a difference by reducing Stamp Duty levels, and a change at the top could allow for greater movement in both the middle and lower price brackets. A fluid and swift moving London market would be more stable should we end up having to tackle a hard Brexit.”
London lettings
With the number of rental property listings said to have depleted since the summer due to, what Jackson-Stops believe to be, a direct impact of the financial restraints on the buy-to-let market, it is expected that rental prices will increase as a result. The estate agent’s London lettings division saw prices strengthen over their busy summer, which traditionally experiences an increase in demand, and predict prices to continue slowly strengthening over the New Year. This is particularly the case with rental contract renewals, where prices may have fallen behind the current market price.
Jackson-Stops also expect to see a continued increase in super prime rental properties in prime central London, boosted by the price sensitivity in the sales market.
Georgina Clarke, Lettings Director at Jackson-Stops London, comments: “Despite Brexit fears, we are still experiencing strong levels of demand from corporate companies who are relocating their staff to London. We are seeing high levels of interest particularly from employees of large tech and IT companies, such as Google, who are looking for a base in the capital for around two to three years.
With Apple expected to establish its new London headquarters at Battersea Power Station, moving around 1,400 employees from its eight London sites, this new ‘campus’ will start to breathe life into Nine Elms next year. This, together with the new American Embassy, is likely to have a significant impact on demand for rental accommodation in the local area in coming years.”
Country homes
Country branches expect to see prices remain level across 2019, with some branches in the South East predicting prices to increase by just 1 to 3%.
Looking further up the country however, branches in the East Midlands note that price drops of between 5% and 10% are possible across 2019 and 2020 should the UK receive a bad Brexit deal. Branches in the North expect there may be a 5% drop over the first three months with transaction deals showing a temporary decrease in values as a result of the deals that had to be done quickly in the run up to Brexit.
However if and when the UK has left the EU Jackson-Stops’ branches in this area expect prices will continue rising steadily.
Over the last year, downsizer and family buyers have driven the bulk of all transactions in the South East of the country. London buyers looking to relocate to areas such as Midhurst also represent a significant proportion of buyers and enquiries, but according to Jackson-Stops’ branches, these sales have and are expected to continue taking longer to fulfil.
Nick continues: “The English love affair with a quintessential country home will continue to endure in 2019. While the market may not be as buoyant as it was a few years ago, beautiful homes in bucolic countryside which are accurately priced will always achieve strong interest. The market is well-educated and both buyers and sellers with a desire to move continue to feel confident in their decision. Prices plateaued somewhat over the last few months of the year, and so we can anticipate a slightly quieter period over March.
However, come the end of Spring, we expect confidence and activity to return with the warmer weather and any well-priced country homes with easy access to good transport links and sought-after amenities will continue to sell.
Many of our country branches, including Wilmslow, have seen a spike in demand for higher value, mixed-use properties over the last 12 months. With it looking unlikely that any reform will be made to stamp duty rates on properties in the middle to top end of the market, we can expect this trend to continue into the next year as when it comes to mixed-use properties, commercial stamp duty land tax rates can apply to purchases that include offices or agricultural land. For those looking to purchase upwards of £2 million for example, finding a mixed-use home can save thousands in stamp duty costs.”
New homes
Assuming the UK receives a positive outcome from Brexit negotiations, Jackson-Stops envisage that current underlying high levels of demand in London will translate into greater levels of commitment in 2019. As a result, competition from buyers is expected to increase and less developments will be available with discounts or incentives. In 2019, £1 million plus new build homes will however become a rarity in London. Over the last 12 to 18 months, the majority of housebuilders have been focusing their attention on planning and building developments with homes suitable for first-time buyers, downsizers, and families looking to purchase properties in the sub £1 million price bracket.
Demand will therefore be high for £1 million plus pads but is unlikely to result in any notable price increases.
In the West Country, property prices of new builds are expected to remain fairly level. Jackson-Stops’ new homes division in Exeter is currently seeing a strong supply of applicants searching for the right home but there is a lack of high quality new homes currently on the market.
Ben Babington, Director of Residential Development at Jackson-Stops London, comments: “Something many housebuilders in Westminster may have to contend with in the New Year is the Council’s plans to limit the size of new homes to 150m². In theory, the idea of limiting the size of new homes in Westminster is sensible, although 150m² is arguably too small given the typical purchaser demographic in Westminster.
Given its zone 1 location, properties in Westminster are always going to be priced at the premium end of the market and a proportion of wealthy home buyers in this area will simply need more space. This is particularly true of people who will be using the property as their principal home. By not offering the right housing stock to satisfy demand, there is a danger that Westminster may increasingly attract pied-à-terre buyers and buy-to-let investors, instead of permanent residents and families.
It is important that planning policy is used to shape communities and expedite the delivery of new homes that are so desperately needed. However, Westminster Council must take account of the demands of the market with this potential ban. There is very good reason why developers have traditionally built a proportion of larger homes in Westminster - it is what the market wants in this location. The door should at the very least be left open for homeowners to combine plots if the demands of their lifestyle requires it.”
Louisa Hooper, Head of New Homes at Jackson-Stops, comments: “The demographic of our buyers in the West Country has remained reasonably consistent over the last few years but this does vary depending on the stock available. Many of our clients are currently looking for low maintenance, middle to high end village homes in close proximity to good transport links and a range of amenities.
We expect any properties that meet this criteria will be popular with families in the New Year, while new build coastal homes will continue to be sought-after by second home owners. The Exeter office currently has a lack of new homes with sea views, and so further development of this type of property would see an influx from both second home owners and investors into the market in 2019.”
