House prices: market cools ahead of general election
Tue 14 Apr 2015
You are here: Home Some overseas buyers holding off on London houses amid mansion tax uncertainty, say experts House price growth has slowed and new mortgage lending is down, according to the latest housing market data.
The Office for National Statistics found that UK house prices increased by 7.2 per cent in the 12 months to February, down from 8.4 per cent in the 12 months to January.
Gross mortgage lending totalled 13.6bn in February, an eight per cent decrease from January's total and an eight per cent decrease compared with February 2014, according to data from the Council of Mortgage Lenders (CML).
The council's director general Paul Smee blamed "seasonal factors" and suggested the dampened lending activity might have been made worse by uncertainty ahead of the general election .
Buy-to-let saw an increase in annual lending and lending values in February compared with the same period last year. The number of buy-to-let loans (15,900) was up 11 per cent, while the worth of the loans (2.2bn) was up 16 per cent. But every other market segment, including first-time buyers, saw decreases, reports Financial Adviser.
London house prices are also no longer the UK's fastest rising, as growth in the capital has slowed down compared to other regions.
In a list of year-on-year house price growth for different areas of the UK, London has fallen from top place in January to third place in February, with Northern Ireland and the east of England now occupying the top spots.
Peter Rollings, CEO of Marsh & Parsons, told City AM : "We're used to London being the country's house price engine, but today's figures suggest that the city may no longer be the lone driver."
He suggests there has been a "slight tail-off in appetite" from overseas buyers in light of "acute political uncertainty and proposals for a mansion tax".
Nevertheless, the average house price in London is still climbing and remains the most expensive in the country at 490,000 157,000 more than the South East, the UK's second most expensive area for houses. While Northern Ireland tops the growth list, it has the cheapest average house price of 152,000. House prices 2015: growth 'will slow to 4%'
The number of first-time property buyers in the UK has risen to its highest level in seven years, according to new research from one of Britain's biggest lenders, but overall growth in the housing market will be lower in 2015 than it was last year, experts predict.
Halifax said that the number of buyers entering the housing market increased by 22 per cent to 326,500 last year, just short of the 23 per cent increase in 2013.
Government schemes such as Help to Buy, better job prospects and cheap mortgage rates have all contributed to the increase, the BBC says.
The news comes as an estate agent says that prime London property, which has been running ahead of the rest of the market, is starting to cool. In 2014, several areas outside the capital ouperformed it for the first time in six years.
"The cost of a home in London's most expensive boroughs rose by an average of 2.6 per cent last year, while growth in the UKs top regional markets averaged 3.2 per cent," The Times reports, quoting figures from Savills.
"The international property group partly attributed the slowdown in the capital to the recent overhaul of the stamp duty system."
At the same time, the improving prospects for first-time buyers is likely to have a positive effect on the rest of the market.
"First-time buyers are vital for a properly functioning housing market," Halifax's mortgages director, Craig McKinlay, said. "Improving economic conditions and rising employment levels have boosted confidence among those thinking about getting on to the housing ladder for the first time, contributing to the significant increase in the number of first-time buyers in the past two years."
But the news comes amid predictions of slower growth across the property market in 2015, with the BBC noting that many experts anticipate growth of just four per cent this year, compared with 7.2 per cent in 2014.
The looming general election will be the major factor affecting activity in the housing market in the early part of 2015, explained Ray Boulger from mortgage brokers John Charcol. Growth is unlikely to pick up until the results are known, he added.
The outcome of the election could have a huge impact on the market, says Nicole Blackmore in the Daily Telegraph, as "many buyers at the higher end of the market will be concerned about Labours proposed 'mansion tax', which will apply to all homes worth more than 2m".
This "nervousness" among high-value property buyers, particularly in London, will serve to restrict house price growth not just in the capital but across the UK, housing expert Henry Pryor told the BBC.
Of course, forecasting property prices "isn't an exact science", notes BT.com. In a rundown of the predictions of leading experts over the past eight years, the site found that many were extremely inaccurate, with some forecasters' calculations out by as much as ten per cent. "Given their track record, it will be interesting to see wherever any of them get close."