|
|
London Update Issue 31 What Can the Government do for Property?
What Can the Government do for Property? What, if anything, should the Government be doing to stimulate the property market? The question was brought to the fore by speculation that Alistair Darling, the Chancellor of the Exchequer, was considering suspending stamp duty in an attempt to get the market moving again. Stamp duty rumours – widely believed to have been started by a leak from Downing Street – have not been denied by the Chancellor, who claims to be considering a number of different policy options. However, a full-blown suspension now seems unlikely: what is possible is a deferral of any duty payable on properties up to a value of £250,000. What is clear is that the leak has done little either for the reputation of the Government, seen to be floating populist proposals with little thought for the consequences, or for the housing market. Indeed, the speculation has had the effect of slowing almost to a halt an already stagnating market. A National Association of Estate Agents (NAEA) survey found that 25 per cent of agents have had sales fall through as a result of uncertainty over stamp duty, while 75 per cent said applicants are now asking whether they should postpone purchasing until after the Chancellor’s pre-budget statement in the autumn. "Potential house buyers are now hesitating in the hope of escaping paying tax," says Seamus Kavanagh, managing director of Badger Holdings, parent company to Townends & Regents estate agents. "The Chancellor's refusal to confirm what changes are on the cards is causing the industry to take another blow." For agents and developers, this blow could not have come at a worse time. The market is already moving painfully slowly: the latest figures from the Royal Institution of Chartered Surveyors show that over the past three months, the average number of property sales handled by surveyors fell to just 14.4, its lowest level in 40 years. While most estate agents would be happy to see the Government suspend stamp duty, past evidence suggests that such a move would not help. In 1991, during the last housing market crash, Conservative Chancellor Norman Lamont effectively suspended stamp duty for nine months by raising the minimum threshold from £30,000 to £250,000, to no avail. Both the number of transactions and house prices continued to fall during the period of suspension, and it was not until the mid-1990s that prices began to recover. Even if the Chancellor chose to abolish stamp duty completely for first time buyers purchasing properties worth up to £250,000, it is unlikely that this would have a dramatic effect, given that it would save buyers between £1,250 and £2,500. Set against the fact that the average mortgage deposit paid by first time buyers is rising rapidly, currently amounting to a whopping £28,350 for an average priced property of £218,112, stamp duty pales into insignificance. "The Government’s reticence to dispel speculation over its intentions for the mortgage and housing markets will only make matters worse" There is another argument, put forward by both the Liberal Democrats and the Conservatives, against a short-term suspension of stamp duty, and that is that it’s not wise to encourage first timers to hurry into the market at a time at which prices are falling and they could therefore find themselves sinking into negative equity. That said, there is no doubt that there are good arguments for a more comprehensive reform of the stamp duty system. Estate agents and accountants alike have long criticised the 'slab' structure of the tax, under which the highest appropriate rate is charged on the entire purchase price of the property, rather than just that portion which falls above the relevant threshold. This creates distortions in the market around the threshold levels of £125,000, £250,000 and £500,000, as well as creating significant fiscal drag when house prices are rising. The fact that house prices are significantly higher in London and the south east than in other parts of the country means that stamp duty has other pernicious effects. "Stamp duty restricts labour mobility which is going to create a big problem if the economy starts to shed jobs at a faster rates," says Matthew Hall, head of tax services at Wilkins Kennedy, the accountancy firm. Written by Paula Hawkins – Paula writes on the residential property market for a range of national newspapers including The Times, The Independent, The Sunday Telegraph and the Evening Standard.
London Property Market 'Over the Worst' Average house prices in London fell by just 0.2% last month according to Haart and there are clear indications that the worst of the market is over. First time buyers have regained some confidence and are using the market to their advantage. First time buyer purchases are up 2% on this time last year and 1.2% month on month (latest National Association of Estate Agents figures). UK-wide Buy-to-Let Yields Stable 6.4% Landlords continue to benefit from strong rental demand. Rents across the UK have seen an annual rise of 9.3% according to specialist BTL lender, Paragon. Average UK rental now stands at just shy of £1,000 a month, giving an average yield of 6.4% for the second month in a row. Landlords in London have seen average rental rates soar by 19% during the past 12 months.
First time buyers are returning to the market, rental yields have stabilised and annual rent increases are soaring Constrained Supply Buoys up London Property Market Savills has estimated that up to half of all high-rise residential developments are being put on hold as developers reassess the market. The National House Building Council also reposts that applications to start new homes fell by 42% in the second quarter of 2008. This lack of construction in the sector is expected to put the housing market back on track by next year and according to the Centre for Economic and Business Research (CEBR) will fuel a 30% increase in house prices over the next three years. The report states that prices will peak at the end of 2012 when average UK prices will have increased by more than £50,000. This optimism is shared by the National Housing Federation (NHF) which predicts that prices will rise by 25% over the next five years. In it’s Home Truths report, the NHF expects the price of average UK property to stand at £274,700 by 2013, up from its current average of £218,000. 36% May Never Own a Home A quarter of people may never afford to get onto the property ladder and will stay in rented accommodation, according to research from moneysupermarket. A further 11% of those polled indicated that they will not buy out of choice, highlighting a growing population that prefers the flexibility of rented accommodation. London House Prices up Year on Year "Greater London has seen an annual price rise of 1.4%" Rightmove. Buy-to-Let Proposals Unveiled The Law Commission has unveiled plans to tighten the regulation of the buy-to-let market and improve standards. The reforms include establishing a housing standards monitor, a stakeholder board, a single code of practice for landlords managing property and making landlord accreditation schemes available in all local authorities. The commission and Government will spend the next six months evaluating ways to make the reforms practical and attractive to landlords. The proposals follow calls from the British Property Federation (BPF) to encourage institutional investment into the rental sector and is seen as an important step in not only improving the rental conditions for the UK’s swelling number of tenants, but also in building the reputation and professionalism of landlords. Repossessions Rise, But are a fraction of 1990s Rate The Council of Mortgage Lenders (CML) has announced that the rate of repossessions for the first half of 2008 was 0.16%, up from 0.11% in both the first and second halves of 2007. However, it should be noted that this level is still less than one quarter of the rate seen during the last market downturn in 1992. Base Rate Held at 5% Inflationary pressure is at such a level that the Monetary Policy Committee (MPC) could not reduce the base rate without running serious risk of inflation pulling yet further away from its 2% target. However, mortgage rates, particularly for buy-to-lets have not been closely correlated to base rate for some time with major lenders dropping rates by a total of 0.60% in the last month alone. Record Inward Investment to London Think London has revealed that the capital attracted record foreign inward investment in the year to March. The agency states that 179 international companies set up or expanded their business in London, despite the credit crunch. City of London Acts to Retain Dominant Status The Square Mile just has the edge over New York as the World’s dominant financial city, but other cities are close on the tails of the top two. The credit crunch has made western cities look stagnant compared to the soaring growth of the Middle East. And whilst 90% of respondents to a recent CBI survey considered London to be a favourable place to do business, 60% believed its position to be under threat. In response, the Treasury has formed the Financial Services Global Competitiveness Group to report on threats to the sector and ways to tackle them. In addition, Bob Wigley, chairman of Merrill Lynch, is leading a separate review of London’s position on behalf of Mayor Boris Johnson. Working with McKinsey, and representatives from each major financial sector, the Wigley’s review aims to define radical and practical business solutions so protect the capital’s position. Crosby Report Sees no Quick Fix to Mortgage Market Sir James Crosby’s interim report into improving the wholesale mortgage market on behalf of the Treasury has concluded that there is no ‘quick fix’ and that long term funding of mortgages should be left to the market. It leaves open the possibility for temporary government support to lenders with a view to increasing availability of credit and reducing costs but states that a permanent agency to underwrite lenders’ mortgages is undesirable. JP Morgan Chooses Canary Wharf over The City JP Morgan has pulled out of plans to relocate to a 1m sq ft development in the City of London and has agreed terms to relocate to Riverside South, the planned Richard Rogers building close to The Landmark in Canary Wharf.
JP Morgan will become a neighbour of The Landmark after shunning the City in favour of the Richard Rogers designed Riverside South building at Canary Wharf. 3i Infotech, the global IT provider, this week also confirmed plans to move its European Headquarters to Canada Square in Canary Wharf. Canary Wharf Crossrail to be Foster Designed Biodome Canary Wharf Group has unveiled its Foster & Partners designed plans for the Isle of Dogs Crossrail station at the northern fringe of Canary Wharf. The scheme will include four floors of retail space totalling 100,000 sq ft, comprising restaurants and a children’s centre underneath the station. The station itself will be contained under a biodome roof garden designed by world renowned landscape artists, Gillespies. It is due to be operational in 2017.
Ambitious plans for Forster and Partners’ designed Crossrail station include biodome gardens and super-green credentials. Mayor Lays his Cards on the Table with High Rise Approval Boris Johnson, Mayor of London, has broadly backed St Modwen’s proposals for a 31 storey tower in East London. Part of the £75m redevelopment of Queens Market in Upton Park, the scheme will provide 68,000 sq ft of new shops, 164 market stalls and 350 new homes, as well as new civic space of 21,000 sq ft including a new library and landscaped courtyard. In an initial response to the application, the Mayors office recommended that the quality of the designs be further proved, but did not oppose the inclusion of the proposed tower. Policy Exchange calls for southern towns expansion The Policy Exchange has called for expansion of London, Oxford and Cambridge at the expense of poorer towns. The report, Cities Unlimited, suggests there is room for 500,000 more people on former industrial land in London. However, somewhat controversially, the Tory think-tank says struggling northern cities will never be able to regenerate and efforts should be focused elsewhere. Johnson calls for New Ecofriendly Airport in Estuary Boris Johnson has stressed how “urgent” it is to investigate options for a new ecofriendly airport in the Thames Estuary. The London mayor made his comment after witnessing what he said was the poor treatment of passenger’s at Gatwick and pointed out that London will suffer at the time of the 2012 Olympics if nothing is done to address the situation. Council Agrees £1.5bn Elephant & Castle Regeneration Consortium led by Lend Lease has formalised its development agreement with Southwark Council for the long awaited £1.5bn development of Elephant & Castle in London. The 52-acre, mixed-use development is to include 5,000 homes and 800,000 sq ft of retail space. The scheme already has planning consent on two phases of residential development, with the remaining elements of the scheme still in the planning process on the rest. Councillor Paul Noblet, Southwark Council’s executive member for regeneration, said: 'Signing this partnership agreement shows the level of commitment on both sides to push this project forward and I'm looking forward to seeing the project come to fruition during the coming years.' Lend Lease Elephant and Castle project director, Mark Boyes, said: "For Lend Lease, this is the next stepping stone in this exciting project's progression. We have been working hard on the detailed masterplanning over the last new months and we look forward to sharing our thinking with Southwark residents and local organisations in 2009." London Update Podcast - Coming Soon
Kings Quarter The latest news from Kings Quarter’s developer is that completion should take place from early October. Young Group will be contacting investors shortly to confirm the next steps and as completion draws near, Young London (Young Group’s high street estate agency business) will be instructed to source quality tenants for those investors who have signed and returned terms of business instructing Young London. Young London Attention Turns to Dalston, E8 The rental market is extremely buoyant and as we approach the beginning of September, the Young London team has seen enquiry levels rise even further. Almost all units at myBASE1 in Southwark have been let and the Young London team is also now showing prospective tenants apartments at The Interchange in Dalston. Feedback from tenants has been positive, particularly with regard to The Interchange’s location and ease of access to local amenities, so much so that a number of apartments have already been rented. In addition, The Retreat in Earlsfield, SW18 is also now being marketed. It's proving to be a popular location and the build quality and finish set it apart from other properties in the area, so much so that Jean Pierre Kalebic, manager of Young London is confident that the properties will be snapped up; "The stylish, boutique nature of the development really sets it apart and the location— just a stone's throw to Wandsworth—makes for a very desirable combination. I expect the apartments at The Retreat to be highly sought after." Post Office Come to myBASE1
A new Post Office at myBASE1 has opened in the convenience store. The Post Office and general store will shortly be joined by the first Young London office. In early August, the Post Office store relocated from Borough High Street to commercial space at the myBASE1 development. The new Post Office service, which has opened in a convenience store at the site, was welcomed be residents moving into the development. The general store offers a full range of everyday essentials at competitive prices, as well as a 'Bake & Bite' service of freshly baked pastries and tea/coffee. Young Group specialises in providing Property Portfolio Management services to private investors; offering the best off-plan direct investment opportunities in London, as well as access to indirect, development fund investment opportunities through its development arm, Young Property. Young Group manages the entire investment process. For direct investments this spans from sourcing the opportunities through to financing, furnishing and letting. Young Group owns all the property that it sells, and also retains a number of units in each development for its own portfolio. As the principal in every transaction, Young Group does not realise any profits until completion and has transacted in excess of 1,700 apartments, with a retail value of £700 million. The Group’s lettings division, Young Lettings, has successfully let the majority of investors’ apartments within a week of completion. Young Group supports NORWOOD and CHILDREN with LEUKAEMIA, two charities particularly close to our heart, donating £50 per property exchange. t: +44 (0)845 356 1000 e: info@younggroup.co.uk |
Your monthly London Update from Young Group will soon be available to listen to as a podcast. You’ll even be able to subscribe through iTunes (or via an RSS feed on your PC), to automatically receive the latest podcasts, to listen to at your leisure.
|
||||||||||
|
||||||||||
|
||||||||||
|
||||||||||
|
||||||||||
|
| © Copyright 2008 Young Group Young Property, Young London, Young Finance, Young Furnishing and Young Investment are all trade marks of Young Group |