First off, how is the market looking?
Trevor Kearney, Director, Savills Residential: It has become clear over the last few months there is a significant pool of buyers who are motivated and looking to trade once there’s more clarity around Brexit, whether that’s with a deal or not. In central London, you have properties in some of the most prestigious postcodes that, due to price adjustments, are now looking like extremely good value. For international buyers, the fall in the value of the pound means they could get a significant discount, which means there are people poised to transact once Brexit happens.
Gráinne Gilmore, Partner – Head of UK Residential Research, Knight Frank: Price growth is moderating, but the market is localised when it comes to pricing. The spread of annual price growth across the UK in the year to September ranged from -1.7% in London to +3.4% in Northern Ireland. So, overall activity levels across the UK remain relatively stable, with the number of home sales declining only modestly in the last two years. Rising wages, high levels of employment and ultra-low mortgage rates are all serving to underpin pricing. Needs-based buyers are as focused as ever on transport links, schooling, lifestyle and amenities.
Let’s talk the impact of Brexit….
Trevor: Taking prime central London as a starting point, there’s certainly a feeling the market has bottomed out. Analysis by our researchers shows values in the last three months actually experienced their smallest quarterly adjustments of the past four years. Further price falls are not something they anticipate, simply due to how far values have already adjusted.
Gráinne: Despite the political uncertainty, we are still seeing a sharp rise in potential buyers registering their interest in both the London and country markets. Knight Frank data showed there were 11.4 prospective buyers for each new home listed for sale in August – the highest level in more than a decade.
In which areas of the market is Brexit hitting the hardest?
Bertie Hare, Senior Associate Director, Strutt & Parker: Properties in the £3m to £15m range are most affected at the moment. Below that price bracket, people need homes, so they are forced to get on with it, regardless of the buying landscape. Above £3m, people take a view because they can afford to.
If we leave the EU with a deal, what will happen?
Bertie: We will see renewed confidence in the market and a release of pent-up demand from ‘would be’ pre-Brexit buyers. London has been a safe haven in bricks-and-mortar terms for years and the fundamental reasons for this haven’t changed. The pulls of London (schools, parks, restaurants, culture) haven’t disappeared and this appeal will once again make London a popular choice for international investors.
Trevor: The current market is being driven by sentiment, but our researchers believe this will change in the medium to longer term, once economics start to have more of a bearing. For example, there has been discussion of a change in stamp duty, but researchers say this is unlikely. With a general election on the horizon and a possible extension to Brexit, Savills researchers are expecting the market will continue to be needs-based and price-sensitive. This certainly tallies with what we’ve been seeing in the market over the last year, as it has been the sensibly-priced properties that have sold well.
What will happen in the event of a no-deal Brexit?
Bertie: A no-deal Brexit will almost certainly bring house prices down, but it is very hard to predict by what sort of degree. There is little (or no) historical data that could be referenced to make a comparative analysis. The value drop would be a relatively short-term lull while the dust settles.
Would you advise people to buy property now?
Trevor: If a home ticks all the boxes you are looking for, go for it. Many of the buyers we deal with are looking for somewhere they can live for many years to come, often it’s where they’ll raise their family and the house will be their ‘forever home’. All too frequently we see people deciding not to offer on something, only to later feel the property was ‘the one that got away’. Or they simply take too long to make their minds up and end up being in a competitive-bids situation. We shouldn’t forget people are still buying – and in significant numbers. If you look at transactions over £1m, they have actually remained level since 2016, so although there is caution in the market, it’s important to remember that sales are still happening. This could quite possibly be a period where people will look back and think, ‘That would’ve been a good opportunity to buy.’ Only time will tell but, ultimately, if a buyer has found the property they want and need, they should offer on it.
What would you say to people who have no choice and need to move house now?
Gráinne: Despite the political landscape, people who have put their homes up for sale can still attract much interest, especially when the property is priced in line with market conditions. Home buyers from overseas are also benefitting from an effective currency discount, given the weakness of the pound.
And are there areas should we be looking out for as buyers?
Trevor: It’s no surprise market towns within the home counties are highly valued because of everything they come with: good commuter links, a decent high street, attractive housing and good schools. In places like Weybridge, Sevenoaks and Beaconsfield, average house prices can edge towards the £1m mark. If a buyer knows the region they want to be living in, and if commuting is a primary factor in their move, looking further along the train line or even to places where they’d need to drive to a nearby station could bring up neighbourhoods that offer better value but without too much of a compromise on lifestyle. For example, the average house price in Esher is £828k, but looking a little further south west you can find somewhere like Woking, which has a similar commute of under half an hour and an average house price that’s almost £355k lower.
Do you think Crossrail will affect prices much?
Trevor: For people living in areas that will be served by Crossrail, the link will hugely benefit their lives and, of course, we know strong transport connections do contribute to local house price values. Crossrail is one of those things that will really impact people’s personal circumstances in so many positive ways. The prospect of being able to get from west London into central London in a little over ten minutes and the City in under 20 is incredibly exciting. It’s almost life-changing for parents who want to be able to get home to see their kids after work.
Bertie: There will be many places which benefit from Crossrail. We have already seen some pricing uplift factored into the market. Acton, for example, is already seeing a positive effect.
Gráinne: Large transport infrastructure improvements can boost house prices as transport times are reduced. Our research showed an average 7% outperformance in house prices around stations along the Elizabeth Line between 2008 and 2017, with larger uplifts towards the centre of the line. There may be further uplifts to come as the line nears completion, especially around stations that are also benefiting from large-scale development. Rents are also likely to reflect the improved connectivity as soon as the trains are up and running.
How might a Corbyn government impact house prices?
Bertie: Badly! Proposals to tax a second home, holiday home or investment property owners more aggressively will put the brakes on London and the wider markets again. In the rental sector, plans to transfer council tax onto landlords instead of tenants, coupled with an annual tax, will probably cause many landlords to sell up. This potential council tax saving will more than likely end up being transferred into weekly rental prices on account of a lack of supply, so both tenant and landlord will end up losing out. Under Corbyn, Labour has talked about ‘phasing out’ stamp duty for single home owners. This would be beneficial to a number of people on a basic level, but the actual details of this remain woolly.
Trevor: While negotiations with the EU continue, buyer and seller caution will remain. The prospect of a general election only adds to this. However, because of the significant price falls we’ve already seen, and because of the size of the swing that would be required to install a hard-left majority government, further price falls are not something we’re anticipating.
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