08 Jun Long term outlook for UK prime country market looking positive
The long term outlook for the UK’s prime country property market is positive, but the election result is unlikely to lead to significant price growth, according to a new analysis.
The result of the General Election has marked an end to the uncertainty experienced in the UK prime markets in the run-up to polling day, when concerns about taxation and personal finances led to weaker demand at the start of 2015, the Knight Frank report points out.
Indeed, it shows that annual price growth had slowed to 2.5% by March, down from 5.2% in the second quarter of 2014 but prices have risen by nearly 1% so far this year and by 2.5% annually.
‘We now expect there will be more positive trading conditions as buyers and vendors return to the market. Transactions, which had been put on hold pending the outcome of the vote or as a result of a wider sense of political uncertainty, will proceed,’ said Oliver Knight of the firm’s residential research unit.
However, prices remain below peak levels, creating an opportunity for buyers and prime market activity has picked up over the last 12 months,’ the report also says.
‘With a Conservative Cabinet, the possibility of a mansion tax for properties valued at over £2 million has gone. Now, one of the key questions is what effect a more certain political environment will have on prices,’ explained Knight.
‘While the confidence engendered by political stability is expected to result in a rise in market activity, any expectations that prices will jump significantly as a direct result of the general election may be unrealistic.
‘Any market is based on supply and demand and the number of new properties coming to the market is expected to increase. This rise in supply, together with uncertainty as to the precise direction of fiscal policies of the new government is likely to mitigate significant price rises,’ he pointed out.
‘Additionally, higher purchase costs as a result of the increase in stamp duty announced in December need to be considered. As a result of that change, the up-front cost of buying a property valued at more than £937,500 has risen,’ he added.
The report says that overall the long term outlook for the prime country market is positive as for now interest rates remain at record low levels, economic growth is steady and mortgage rates are competitive.
‘As the economy continues to improve the ripples of demand from London will strengthen. Popular commuter locations, within easy reach of the capital, are likely to be the biggest beneficiaries,’ said Knight.
‘There has already been an increase in the number of buyers looking to exploit the relative price gap that has opened up between London and regional prime markets and the expectation is that this will continue,’ he concluded.