Taylor Scott International News
A more challenging domestic and global economic outlook and political uncertainty in the lead up to next year’s general election are having an impact on property price growth in the UK. According to the latest analysis report from Knight Frank while the first interest rate rise for years is now expected in the second half of 2015, the UK economy is facing additional challenges from overseas. It points to the continued problems in the Eurozone, the withdrawal of quantitative easing in the United States and the fact that global economic growth has also slowed to a six month low. ‘It is a combination of these factors which prompted the Bank of England to push back its expectations of when the first base rate rise will occur. With a much more benign outlook for inflation, the markets are now pricing in a rise in October 2015, with the expectation that the base rate will still only be at 1% well into 2016,’ said Grainne Gilmore, head of UK residential research at Knight Frank. ‘As a result of the new outlook for interest rates, mortgage rates have receded again, which is good news for home buyers and those re-mortgaging their home. However there are also factors weighing on the mortgage market which are likely to feed through to slower activity, such as the new loan to income criteria from the Bank of England, as well as the new rules for mortgage applications under the Mortgage Market Review started in April this year,’ she pointed out. The analysis report also points out that UK house prices rose by 0.5% in October, with the annual rate of growth slowing to 9%. Prime central London house prices remained static in October, the first month in four years in which no growth was recorded. Annual growth in prime central London prices slowed to 6.5% and rents in the prime Home Counties market fell by 0.8% in the third quarter of the year but the annual rate of growth moved into positive territory at 0.1%. ‘Residential property price growth is slowing across the country, including prime central London where the political uncertainty in the run-up to the election, especially over a potential mansion tax, is tending to weigh on activity,’ added Gilmore. The report records that prime central London prices did not rise in October, but are up 6.5% year on year. But price growth in the prime central London market continues to moderate amid growing political uncertainty in the run-up to next year’s general election. ‘The election is primarily causing unease because of the property tax measures which depend on the outcome. Both Labour and the Liberal Democrats have pledged some sort of tax on higher value properties, whether a ‘mansion tax’ or a re-banding of council tax,’ explained Gilmore. ‘Ed Balls, the shadow chancellor, pledged that those in homes currently valued at £2 million to £3 million a year would not pay more than £250 a month, or £3,000 a year (after tax) as part… Taylor Scott International
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