10 Dec London property prices to continue rising faster than rest of UK in 2014
London property prices will continue to outperform those in the rest of the UK in 2014, but the rate of growth is expected to stabilise, according to a new report. The forecast from estate agent Marsh & Parsons predicts that house prices in the city will rise by 5 to 7%, down from 10.3% in the last 12 months. The firm also says that most of this growth is likely in the first six months of the year.
‘London’s housing market saw a substantial uplift in 2013, and we expect a similarly strong start in 2014 to drive an annual rise in prices but these won’t be as spectacular as last year. With ongoing support from government initiatives, the rate of growth will remain sustainable,’ said Peter Rollings, chief executive officer of Marsh & Parsons.
‘Following improvements in unemployment levels, we’re likely to see modest increases in interest rates next year. But with a general election coming up in 2015, any changes are unlikely to create shockwaves through the housing market,’ he added.
In the forecast report the firm also says that a lack of supply being met with high demand will continue to drive price increases in the prime London property market. At the end of 2013, there were 18 registered buyers per available property, compared to 13.5 at the end of 2012 and this ratio is expected to remain high in 2014.
‘Many sellers will remain cautious of putting their property on the market as they are not confident that they will be able to find somewhere to move to, therefore supply is unlikely to improve considerably next year,’ explained Rollings.
‘As a result, property will continue to sell for close to or at the asking price and we may see our average success rate of 98% of the sale price currently being achieved in prime London increase even further,’ he added.
He pointed out that changes in policy announced in UK Chancellor George Osborne’s Autumn Statement mean that foreign property owners who sell second homes in the UK will have to pay Capital Gains Tax from April 2015. But the belief is that with overseas buyers and foreign nationalities making up just 28% of all prime London purchases in the third quarter of 2014 this change in policy is unlikely to have any dramatic effect on prices in 2014.
‘With the change only being introduced in April 2015, we may find a short term rush for tax free sales before the policy comes into effect, helping to boost supply and fluidity at the highest level. However, even with yet more tinkering from the Chancellor, London remains a more attractive and easier place to buy property than many other cities around the world, and providing that the politicians don’t kill the golden goose, demand for the best properties will remain fierce,’ said Rollings.
As far as the rental market is concerned Marsh & Parsons expects rents in prime London to hold steady in 2014, with rises of 2 to 4% as opposed to the generally static rent levels recorded in 2013.
Rollings pointed out that the improved economic mood has eased anxiety among city firms. ‘As a result, the corporate lettings sector will flourish next year. Based on current trends, we expect the greatest rental increases to be found in two-bedroom properties in central areas such as Kensington and Chelsea, which are popular locations for visitors from abroad. As competition heats up, void periods will continue to fall, and 2014 tenants will face intense competition for the best properties,’ he said.