The world of Property is never stagnant, so it pays to keep an eye on market changes. Legislation tweaks and shifts in the market all have their impact, but where one door closes another usually opens. There are always ways and means for determined buyers to find a good deal, if you know where to look and understand current market trends.
The Changing Market
The attraction of the city means there is no shortage of interested parties for London’s prime property market.
The biggest change is in where those buyers are coming from. Until recently, Russians made up 6% of the market but in 2015 that was down to just 1%, with sanctions playing their part in deterring this market section. Similarly, Chinese buyers historically accounted for 8% of the market, a figure that’s now down to around 2%, having shifted their attention to properties outside prime areas.
So significant is the change in area interest that one leading estate agent is now calling the regions of Islington, Southbank, King’s Cross and Riverside a separate prime market. These regions are predicted to outperform the traditional prime market areas, with price increases of around 26% to 2020.
As is always the case where one part of the world sees a downturn in economy, this is balanced by a boost elsewhere. Currently, India and the Subcontinent are experiencing just such a boost, with investors from these regions now attracted to prime central London property. It is estimated, for instance, that around 3,000 Indian families have invested here, with particular interest in the new build and off plan sector.
Budget Relief for 2016
The property market collectively holds its breath around March before the Chancellor releases details of the budget for the coming year. Recent budgets have delivered a few sharp shocks to property buyers, leaving the market uncertain and wary. There was a collective sigh of relief when this year’s budget proved relatively kind to property buyers.
Of particular interest were the clarifications regarding the stamp duty surcharge on buy to let investments and second properties. Existing flexibilities in the stamp duty system will remain, including multiple dwelling relief and non-residential rates for those purchasing more than six properties in the same transaction.
Commercial buyers see the biggest changes with the previous 4% flat rate no longer applying. Instead, properties above £250,000 attract 5% stamp duty, up to £250,000 are subject to 2% and those below £150,000 attract no duty.
With the Bank of England predicting that buy to let landlords will find it harder to access funding in the near future, there are fears in some sectors that lending to landlords could reduce by up to 20% over the next few years.
Borrowers are likely to face stricter affordability tests, with lenders considering the buyer’s wider financial situation as well as the likely rental income. While this may restrict the market to more affluent buyers looking to borrow less than 50% of the purchase price, the move is seen as one that makes sense if we’re to avoid a speculative bubble forming.
As well as smaller investors feeling the pinch, larger developers too have faced shelving projects. With bank funding being slashed over the last two years, shrinking from £34bn in January 2014 to just £16bn in the same period this year, developers are finding banks less willing to offer short term finding, although longer term secured loans and mortgage finance is still there.
The good news is, there are still investors who will offer funding, although this could mean turning to professional buying agents to find them. Matching investor to opportunity is a key part of their business, and with the right contacts among private banks and brokers, they’re in a position to help clients source finance.
Drew writes for Black Brick Buying Agents.