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How will Boris Johnson being prime minister affect the housing market

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Fri 26 Jul 2019

How will Boris Johnson being prime minister affect the housing market

 


Boris Johnson moved into 10 Downing Street this week having promised in his acceptance speech that his party would prioritise homeownership.

Yesterday the new housing secretary Robert Jenrick said: “Housing delivery is one of the big priorities of this administration. We are going to be straining every sinew to increase the number of homes that are being delivered and getting more young people and families onto the housing ladder. I certainly intend to do everything I can to elevate this agenda and move it forward at pace in the weeks and months ahead.”

But what does Johnson’s the Brexit pledge mean for the price of your home?

HM Revenue & Customs figures show that the number of house sales in June was 16.5 per cent lower than in the same month of 2018. While some consider this evidence that a “wait-and-see” attitude is becoming endemic, this result may be a blip. Yet it will mean extra focus on the new prime minister’s plans.

What is the outlook for house prices? 
After three years of Brexit uncertainty, there may be a brief Boris bounce in house prices. “Boris’s positive outlook could boost market confidence at least in the short term,” says Jeremy Leaf, an estate agent and former chairman of the Royal Institution of Chartered Surveyors.

The impact on prices of leaving the EU will hinge on how the economy responds. In either Brexit scenario, it will depend on “interest rates, inflation, household incomes and any changes to policies such as stamp duty”, says Aneisha Beveridge, the head of research at Hamptons International, an estate agency. “A rate cut is more likely than a rate rise, should a no deal occur.”

The Office for Budget Responsibility, the government’s spending watchdog, warned last week that a no-deal Brexit would plunge Britain into a recession that would shrink the economy by 2 per cent and trigger house price falls of 10 per cent. That does not factor in measures such as stamp duty reforms.

What are the plans for stamp duty?
Johnson wants to cut stamp duty on homes worth more than £1.5 million from 12 per cent to 7 per cent. He is also considering halving stamp duty on properties worth more than £500,000, and scrapping it below £500,000. At present, only homes under £125,000 are exempt; £300,000 for first-time buyers.

He may also seek to introduce a wider reform, switching stamp duty from buyers to sellers. People climbing up the ladder would pay less tax, but downsizers may stay put, because they would face a larger tax charge to leave their homes. Since downsizers account for only 7 per cent of the stamp duty tax take, Johnson may be prepared to tolerate the wrath of this group. Yet a targeted relief could encourage them to move, freeing up underoccupied homes for families.

What’s happening in the Midlands, the north and Scotland?
Brexit concerns have weighed far less heavily on the market in these regions. Since the EU referendum prices in cities such as Liverpool have risen 12.1 per cent, Leicester 17.5 per cent and Manchester 16.8 per cent, according to Zoopla, a property portal. Even in the event of a no-deal Brexit, prices will continue to rise, albeit more slowly, but only if the economy keeps growing.

“The longer the uncertainty goes on, the greater the chance that the reverse ripple effect, from house prices falling in London, will graduate into the Midlands and the North,” says Lucian Cook, the head of residential at Savills.

In Scotland, Simon Brown, a partner at Galbraith, an estate agency, expects “business as usual”, even if there is a no-deal Brexit. He says a weak pound could make high-end Scottish sporting estates cheaper for overseas buyers, but underlying demand is strong at all levels.

This six-bedroom house in Hammersmith, west London, is on sale for £2.6 million through Finlay Brewer
This six-bedroom house in Hammersmith, west London, is on sale for £2.6 million through Finlay Brewer

What’s going on in London?
Since the Brexit vote, prices in central London have dropped by an average of 4.7 per cent, and by up to 20 per cent in the wealthiest neighbourhoods.

Regardless of a deal or no deal, experts predict that prime central London prices will not drop farther. “There seems to be consensus that it has bottomed out,” Beveridge says. But in the rest of London and the commuter belt, prices are expected to “fall a little bit”, she adds.

The recent price falls have put less affordable areas within the reach of buyers. Since 2014 the price premium of South Kensington over Earls Court has dropped from 40 per cent to 20 per cent, and St John’s Wood over Islington from 53 to 36 per cent, reports LonRes, a property data service.

“You’re still not going to get as much for your money in Battersea as you are in Tooting, but the gap is narrower,” says Marcus Dixon, the head of research at LonRes. The shift means that you may be able to move up the ladder in your present neighbourhood rather than moving to a cheaper area. However, people can get caught out. Family homes in Notting Hill, west London, for example, have had bidding wars coming in at £100,000 over the asking price.

Are overseas investors buying?
Buyers from Hong Kong, China and the Middle East are taking advantage of the falls in London prices and sterling, which mean they can get a 50 per cent discount compared with five years ago. “They often remark that Brexit is buttons compared to what is happening in other parts of the world,” says Hannah Aykroyd, the founder of Aykroyd & Co, a buying agency. Lisa Simon, of Carter Jonas, an estate agency, says a “small handful of clients” deem the risk of a general election, or a possible Labour government under Jeremy Corbyn, too high at the top end of the market.

In Bibury, Gloucestershire, this five-bedroom house set in more than 11 acres is on the market for £1.85 million with Knight Frank
In Bibury, Gloucestershire, this five-bedroom house set in more than 11 acres is on the market for £1.85 million with Knight Frank

What about rural areas?
Young couples and families who want to move out of city centres in search of better air and more space are fuelling a “furnace” of demand for homes under £500,000 in coastal hotspots and market towns. In Pembrokeshire, Carol Peett of West Wales Property Finders says she has had more inquiries in the past six months than in the previous three years.

James Greenwood of the buying agency Stacks Property Search reports the same trend for Wells in Somerset, Shipston-on-Stour in Warwickshire, Ledbury in Herefordshire, Abergavenny in Monmouthshire and Coleford in Gloucestershire. For their first family home, these buyers “are bypassing the move to more traditional commuter areas, which helps with affordability”.

Should I sell now or wait?
Many people will likely wait to see whether stamp duty liabilities are switched from the buyer to the seller, but they need to weigh that up against the risks of a no-deal Brexit, or even a Corbyn government. In the Midlands and the North there is a case to climb the ladder before prices rise farther. Nick Leeming of Jackson-Stops, an estate agency, says: “If you are looking to sell, now is a good time. With stock still fairly limited, there is strong competition from buyers looking for well-priced and high-quality homes.”

Homeowners Alliance, a lobby group, reports that August 30 will be the busiest move day of the year, with 6,500 relocations — four times the average.

What about in London?
Experts say leaving the EU, with or without a deal, will bring certainty to the market, unleashing a “Brexit bottleneck” of three years’ pent-up supply. If you’re serious about selling, market your property now to beat that rush, but only at the right price, says James Hyman, the head of residential at Cluttons, an estate agency.