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Brexit hits asking prices in the UK, latest index shows
Asking prices have fallen in four English regions, London and Scotland with the UK’s decision to leave the European Union being blamed for the change to a 19 month long rise in values. Overall mix-adjusted average asking price dropped 0.2% since June as confidence among sellers was dampened by the outcome of the referendum vote, according to the latest asking price index from Home.co.uk. London prices, which were already looking the most overvalued, have been hit the hardest, falling 1.1% in just one month which equates to around £6,000 less for the average home in the city. The index also shows that the average asking price in the South East has slipped 0.2% during the last month, but the biggest drop outside London was in the North East with a fall of 0.7%. The index report suggests that this fall comes as a serious blow to a region that was just showing the first signs of genuine recovery since the financial crisis of 2007. However, several English regions and Wales are still seeing asking prices rise. The East Midlands rose the most with growth of 0.7% over the last month, followed by the North West and ales both up 0.4%, Yorkshire up 0.3%, the West Midlands up 0.2% and the East of England up 0.1%. ‘As the Brexit vote is only about two weeks old, we may well see these figures turn negative next month. Whilst the key drivers of lack of supply and cheap credit remain, uncertainty brought about by the Brexit vote is undermining the property market,’ said Doug Shephard director of Home.co.uk. ‘Overall, the current mix-adjusted average asking price for England and Wales is now 6.1% higher than it was in July 2015, and we predict this figure will tend towards 0% over the coming months,’ he added. He expects that both consumer and investment decisions are set to be delayed until there is somewhat less uncertainty about future prospects for the UK economy but uncertainty looks set to remain for some time and when it comes to house prices the fallout from Brexit looks set to cut short the price rallies of several regions including preventing a recovery in the North and making the inevitable correction for London and the South East deeper and more painful. The index report also shows that the supply of property has increased in London by 6%, the East of England by 7% and the South East by 4% while the typical time on the market has increased by two days to 82 days over the last month across England and Wales but is still six days less than in July 2015. The total stock of property on the market is also up again but is still 5.2% less than in July last year. ‘In the light of the referendum result, we revise our prediction of 10% growth per annum for these regions down to 2%. The South West also looked set to become… Continue reading
Landlords organisation calls for change of mind on UK tax rises
Private sector rent increases in the UK are inevitable unless MPs move to halt the what the sector believes are unfair tax changes being brought in by the government, it is claimed. The plans to tax landlords on their income rather than after allowances, part of the loss of mortgage interest relief, will inevitably lead to rent increases, according to the Residential Landlord’s Association. Legislation now going through Parliament to implement the Budget will see landlords’ tax bills soar and in some cases will wipe out their profit altogether and as supply of rental homes falls and remaining landlords are facing higher overheads rents will rise to cover costs, the association says. In a recent survey of RLA members, some 84% said that they are likely to consider increasing rents following the Chancellor’s tax hikes which have also included and extra 3% stamp duty charge on buy to let properties. The RLA is now calling for reasonable changes to the Finance Bill to protect both landlords and tenants. It wants the Government to scrap its MIR changes and to remove the stamp duty levy where landlords invest in new property to increase supply in the private rented sector. It has warned this tax raid will have a devastating impact on landlords at a time when the Government needs them more than ever. Some MPs have already voiced concerns. The former Welsh Secretary, David Jones, has called on the Government to stop clobbering landlords whilst the chairman of the influential 1922 Committee, Graham Brady said he has serious concerns about the effect on landlord finances. ‘Landlords do not want to increase rents unnecessarily but many will have to if they are stay in business as a result of these wholly unreasonable tax increases. It is unfortunately tenants who will end up paying the price either through higher rent bills or finding it more difficult to find somewhere suitable to live,’ said Alan Ward, RLA chairman. ‘We welcome the concern of many MPs and hope that they will be able to persuade the Government to change its mind,’ he added. Continue reading
Decline in farmland values in England slows in second quarter of 2016
English farmland values fell by just 1.7% in the second quarter of 2016 compared with a drop of 3% during the first three months of the year, according to the latest index. The average value of English farmland is now £7,773 an acre, some 6% lower than the record high of £8,306 an acre from last September. But over five years it is up 26%, over 10 years up 160% and over 50 years some 4,763% higher. The Knight Frank Farmland index says this compares strongly with other asset classes and also says that demand remains despite the decision by the UK to leave the European Union. Indeed, the index data was collected after the historic referendum on 23 June. The report points out that in the last decade the top end of the residential market in central London, for example, has increased by 98% over the same period, although a post-Brexit scramble for safe haven assets has seen gold’s 10 year return hit almost 200%. ‘Given that agriculture is the biggest recipient of EU funds via the Common Agricultural Policy (CAP) so many UK farming businesses rely on farm subsidies to break even, it might have been expected that the Brexit vote would have had a bigger effect on prices,’ said Andrew Shirley, head of rural research at Knight Frank. ‘However, there are a number of reasons why this hasn’t happened. According to polls, a majority of farmers backed Brexit so the sector will not be unduly pessimistic following the referendum, he explained. ‘The slide in sterling has also had an immediate upward effect on wheat prices and will help livestock exports. Sterling’s loss also makes UK farmland better value for overseas investors. We have already received a number of enquiries from a wide ranging geographic spread of potential buyers attracted by this currency boost and also farmland’s safe haven status,’ he added. Shirley also pointed out that a new round of potential quantitative easing currently being mooted by a number of central banks could accentuate this trend. ‘Prices should remain steady for the rest of the year, but looking further forward it is harder to judge where they will head,’ he said. ‘Much will depend on the outcome of the UK’s trade negotiations with the EU and the rest of the world, as well as how the government decides to replace the CAP. If any of these changes render some farming businesses unsustainable we will likely see more land come to the market,’ he explained. ‘This could put downwards pressure on values, but it will also present opportunities for entrepreneurial businesses and investors, and demand should remain firm,’ he concluded. Continue reading
