Homes of the Future
Sun 05 Jan 2014
SINCE the housing bubble was punctured six years ago London has emerged as a completely distinct market
from the rest of the UK. Housing shortages, immigration and the Olympic effect have all boosted property values
in the capital while international buyers are the reason for spiralling prices in prime areas, now 14 per cent above
the peak of 2007, according to a Cluttons report.
Elsewhere in the UK, forecasters expect prices to rise by between 8 and 12 per cent in the South East as other
factors boost markets, particularly improved mortgage lending and the Government's Help to Buy scheme.
"The ripples from London are beginning to be felt again, with families selling up in the 1million-plus bracket and
moving out of the capital," said Nick Leeming, chairman of estate agent Jackson-Stops & Staff, whose regional
network of agents has enjoyed a bumper 2013.
Areas likely to see above average levels of house price inflation in 2014, that is to say above 8 per cent, are
commuter towns and university cities in the Home Counties where Cluttons, in its analysis, talks of rising "house
price rise anxiety" due to some very strong sales in 2013. January sees the start of another perennial anxiety, that
of applying for a place in a primary school.
Access to top schools has always been a strong market driver and the uplift in prices of family homes within a
mile of the country's top 50 schools has been scientifically studied by Knight Frank. The findings show an
increasing distaste for the school run but the fact that homes near highly-rated St Teresa's School in Dorking are
more than four times the average must also be due to the town's outstanding location in the Surrey Hills.
Near Sevenoaks School in Kent, house prices are more than double the average for the local authority, thanks to
a combination of factors, in which transport plays a large part: "In cities with better transport infrastructure, price
premiums are less marked but typically, for homes within walking distance of a proven education establishment,
there is a significant price uplift," said Grainne Gilmore, research head for Knight Frank.
Regional markets will certainly be boosted by new conditions this spring: "The housing market is almost
unrecognisable from 12 months ago," said David Newnes, director of LSL Property Services, owner of Your Move
and Reeds Rains estate agents.
Thames-side schemes like the Riverside Quarter are transforming the waterfronts of London [PH]
"Not only have average prices climbed to a record high, with an annual rise of 11,219 and a monthly increase of
1,394, but we've also seen an increase in every region for the second month running, a true sign the nationwide
recovery is really taking off."
Another boost for regional property will be the 25billion investment in infrastructure announced by the Chancellor
in the Autumn Statement, including 1billion to unblock stalled housing developments in the North of England.
London's reputation as a safe haven has seen investors from all over the world scrambling to park their money
and the question being asked now is whether the market has overheated.
A rush to build luxury apartments has seen all the major housebuilders turning their attention to the capital as
they race for land. The chance of a property bubble lies not in the odd mansion in Chelsea being sold to anoligarch for
30million but in the sprouting of multi-storey glass towers, many of them located along the Thames
where they are also changing cherished views.
Even Nick Candy, CEO of luxury developer Candy & Candy, last month expressed concerns that the increasing
numbers of high-end flats in the capital could lead to an oversupply and hit values.
Studio flats at Battersea Power Station were snapped up at prices which started at 350,000 but Cluttons warns
that young professionals are being driven to cities where the cost of living allows them to enjoy a better lifestyle.
There is also the inherent danger in that if London's "safe haven" reputation is damaged for any reason,
international buyers will pull out, as Andrew Heywood, author of a report for the Smith Institute called London For
Sale? has pointed out.
The withdrawal of mortgages from the Funding for Lending scheme by the Bank of England is a clear attempt to
control the instability of London, rather than the regional market.
Taxation has also been at the forefront of minds: from 2015, foreign owners of second properties in the UK will be
liable to pay an enhanced capital gains tax.
However, Peter Rollings, CEO of estate agent Marsh & Parsons, said it may actually benefit the market in the
short term: "If the introduction of this tax quells demands for a more draconian mansion tax, it could actually
boost the market.
"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."
The Government is between a rock and a hard place on tax because driving away wealthy foreigners could hit the
market, but not acting will hand the Opposition a trump card for the 2015 election.
Labour has already put the lack of affordable housing at the top of its political agenda.
"With an election looming and a left-of-centre government looking increasingly likely, property and wealth taxes
are moving towards centre stage," said Charlie Ellingworth of Property Vision (propertyvision.com).
"As with all taxation there is the calculation of pain and gain, unintended consequences and the wellbeing of the
proverbial golden goose to consider," he added.
Charlie Ellingworth's Plucking the Golden Goose winter market summary makes excellent reading, particularly on
the matters of property taxation. Housing market warning