The NAEA president predicts where north London property will go in 2015
- Credit: Archant
2014 certainly was an eventful year for the property market. Nationally we saw prices rise by around 7 per cent. But in prime central London they sky rocketed by almost 20 per cent, mainly due to foreign investment.
As a result, prices in north and north west London saw a steady and healthy increase of 10pc -15pc as demand for property far exceeded supply.
It was another year of low interest rates, with the Bank of England base rate staying at 0.5pc. Although more mortgage finance became available than in the previous year, the Mortgage Market Review (MMR) certainly had an impact on the amount one could borrow for a mortgage.
Then in December in the Chancellor’s Autumn Statement, we saw a complete overhaul of the stamp duty system.
So what can we expect from 2015?
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So far as north, north west London is concerned, we begin the New Year with demand continuing to outstrip supply, which bodes well for the continued health of the local market. However it is unlikely that we will see the price increases we experienced last year. This is no bad thing as a steady housing market is preferable to the roller coaster ride of the last decade.
I predict prices to increase gradually, most probably culminating in a 3-5pc increase over the year. The first time buyer market may increase by a slightly higher percentage as the stamp duty changes will allow buyers to put the savings they are making on stamp duty towards their deposit. With this in mind, for those looking to get onto, or move up the property ladder, there is no better time than the present.
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What challenges lie ahead?
With the General Election in May, housing is set to be a hot potato for the major parties. With the Chancellor’s overhauling of Stamp Duty regulations, it is unlikely that the Conservative Party will entertain any other policies that will affect home movers. Their priority will be housing supply, and the building of new homes.
The Help to Buy Schemes have proved relatively successful and it is likely that they will be extended. There are likely to be other measures to stimulate new house building but these policies are likely to have a limited impact in our area in London.
Labour’s much heralded Mansion Tax has the potential to have an effect on those living in the north and north west London area. The proposed policy would disproportionately hit the London market (around 80pc of property valued at over £2 million is in the capital). It punishes hard working Londoners who aspire to reach the higher rungs of the housing ladder, and those who may have bought a property many years ago in an area which has become fashionable where prices have risen beyond their expectations.
There is much talk of a rise in interest rates and how this could affect mortgages and the housing market in general, as well as the implications of a tightening mortgage market. I believe that Mr Carney at The Bank of England is orchestrating a well thought out plan to control the market and hold back interest rate rises through the tightening of mortgage financing.
It is likely that in 2015 we will see another round of constraints put on lenders, in order to ensure that mortgages are future proofed and are affordable for people when rates do eventually increase.
This ultimately should hold back the necessity for interest rates to rise and while it will restrict the growth in the market, it will make for a healthy property market in the long term.
In April 2015, the changes to pensions which come into effect, will allow people to invest their pension pot into property. This is likely to lead to an increase in the demand for “buy to let” properties, which may ultimately lead to a wider choice of property for renters and could produce a levelling of rental values.
Although this coupled with the increased deposit (due to the stamp duty changes) available to first time buyers will likely mean flat prices will increase in 2015 and may ultimately make it more difficult for first time buyers to get onto the housing ladder.
All in all 2015 should be a positive year for the housing market. Demand for property in our area of London will continue and prices should rise steadily.
I do not believe there is an increase in interest rates on the horizon, although I would recommend organising finances as early as possible before the implementation of the next round of the Mortgage Market Review takes place.
Next fortnight Simon will be answering your property queries. Email your questions to firstname.lastname@example.org. Simon is managing director of north London estate agents Martyn Gerrard.