Wednesday 3 April 2013

April already?! A view on the last 3 months.


There is no official data out for Q1 2013 for a few weeks yet, but how has the first quarter of the year been for the London property market? 

The threat of a mansion tax, the introduction of the Annual Residential Property Tax on certain companies and other structures holding properties, London property prices rising, UK property prices falling... it can be quite confusing working out what has happened and where things will go from here. 

The mansion tax is the political hot potato of the moment and will probably remain so for the foreseeable future. Essentially, the coalition government doesn't seem to be able to agree a way forward: recognising the desire for a 'wealth tax' to appease the wider population, whilst being aware of the impracticalities and unpopularity among their core voters. One of the stronger arguments against any mansion tax is that it will tax those who have seen their assets rise in value over the years, however their disposable income would not cover such a tax. It is also considered that the tax would have a disproportionate effect on London, in comparison to other areas in the UK, due to the higher proportion of houses valued over £2m. 

The London market seemed to react in late 2012 to the political noise, with agents noting a significant fall in viewings for properties in the £2m to £5m price range. However, this was very much blown out of the water by the Land Registry figures in March highlighting that sales of properties above £2m were up 35% year on year in the capital. What does this mean? Well, it could mean something or nothing, as there are also many other factors influencing transaction numbers and house prices within a particular period. For now, it seems that the worry of an imminent mansion tax is cooling as parliament continues to remain in disagreement, and therefore one must make hay while the sun shines. 

The idea that nothing will happen at all is hopeful, but not very likely. Therefore, we can probably expect some sort of housing tax shake up in the near future. The loudest chatter seems to be referring to a revision of the council tax system, which is currently based on 1991 values, but there still remains the issue of a high number of people living in high value houses who wouldn't be able to afford the tax. So the way forward remains unclear. 

On the ground, in some areas of London it seemed there was a temporary stock shortage at the beginning of the year as vendors were assessing their next move and waiting until the end of the fiscal year (and bonus season). This didn't seem to affect purchasers however, so with the shortage of good stock and competition among agents, asking prices in the popular pockets of London have edged up further. This isn't necessarily true of all London areas, as the Capital is a web of diverse sub-markets, but certainly in the popular areas of Shoreditch and Battersea, this has been the case. 

Looking into the second quarter of the year, it's likely we will see more decisions being made by buyers and sellers, even if the government isn't able to do so. The continued weakness of the pound and Eurozone uncertainty also means London property will remain attractive to overseas buyers. Shrewd investors will try to price in political risk as much as possible, but in a fast moving market like London where competition amongst buyers is strong, sometimes you just have to get on with it: Carpe Diem. 

On another note, I didn't realise that people still played April fool's jokes until I was very much 'punked' this week. I received a note on Monday morning from a lawyer that we had breached copyright laws for our publication The Buyer's Eye (shameless plug - www.allenwargent.com) and action was imminent. I chose to react with surprise and disappointment as one would, only to learn it was an elaborate prank. The alarm bells should have been ringing upon receipt, we all know that lawyers don't work on a bank holiday. Needless to say, I learnt a valuable lesson and shall be seeking suitable revenge. 

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