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Our Review of the Year

By Maurice Shasha  //  Thu 10th January 2019
There’s been more to 2018 than Brexit, however, from the feel-good factor of May’s royal wedding to the budget announcements designed to increase the supply of new homes.
Our Review of the Year


If you were asked to sum up 2018 in one word, the chances are it would be Brexit. How, when and even if we exit the EU in 2019 is all anyone’s talking about this month, in Westminster, the media and even on the street.

Yet the impact of Brexit on the housing market is a matter of debate. London house prices have been stalled for a while, but this isn’t the case everywhere in the UK.

As to next year, what will happen to house prices is anyone’s guess with some commentators predicting steep rises, once the uncertainty of Brexit is over, and others believing prices will fall, whichever way we exit the EU.

There’s been more to 2018 than Brexit, however, from the feel-good factor of May’s royal wedding to the budget announcements designed to increase the supply of new homes. Read on for our review of the year’s highlights for buyers, sellers, renters, landlords and investors:


January


International interest in London's prime market continues

International buyers continue to invest in the prime London property market, with the majority of those buyers coming from the Middle East and Asia.

After Middle Eastern and Asian investors, EU investors were the third largest group to invest in the prime market.

According to data published in Autumn 2017 by the London Central Portfolio (LCP), buyers from South East Asia accounted for 36% of prime London property purchases in the year 2016-17. This was followed by buyers from India who accounted for 22% of prime property sales, while Middle Eastern buyers took a 21% share of overall sales.

This data shows that parts of prime London, including Knightsbridge, Paddington and Kensington remain popular with wealthy overseas investors who want to buy into a secure, established property market.

However, there are fears the ongoing uncertainty caused by Brexit may deter some would-be overseas investors from buying prime London property, but it seems this has not been the case, with London still viewed as a safe haven.

In the aftermath of the UK's vote to leave the EU in June 2016, favourable exchanges rates for overseas buyers led to a surge in the number of international investors snapping up prime property.

To read the original commentary, please visit - www.plazaestates.co.uk/news/interest-in-prime-market-from-overseas-investors-still-strong



Average cost of renting in London rises

Asking rents in London started to climb again in the last three months of 2017, a 1.2% increase on the same time the previous year.

In the capital, especially in prime London, asking rent increases have stalled in recent years, but, partly as a result of fewer properties available for let, asking rents are now rising again.

Rental stock soared around April 2016 as buy-to-let investors scrambled to secure property prior to the extra stamp duty surcharge on second homes kicking in.

Meanwhile, in April 2017, another tax change was introduced which is having a key impact on buy-to-let investment decisions. The tax relief residential landlords can claim for finance costs is gradually being restricted to the basic rate of Income Tax. This measure is being phased in, so it will have a greater impact on landlords in a few years' time.

But this measure is already having an effect, as it is encouraging some London landlords to sell off some of their portfolio. This reduces the amount of rental stock available. But with demand for rental properties in London still strong, this has helped to push up asking rents.

According to figures published in the Evening Standard, the top five areas where rental demand is strongest are Kennington, Camberwell, Mitcham, West Wickham, and West Norwood.

Rental demand in prime London areas, including Knightsbridge and Kensington, remains strong, while the sales market is showing signs of movement, partly as a result of vendors lowering their sales expectations.

To read the original commentary, please visit - www.plazaestates.co.uk/news/asking-rents-in-london-rose-at-the-end-of-2017



February


Could the Right to Rent scheme be overturned?

The Right to Rent scheme has always been somewhat controversial, and now two legal challenges have been mounted which could, if successful, overturn the scheme.

One case argues that the Right to Rent scheme is incompatible with the Human Rights Act, while the other states that the scheme is fundamentally discriminatory.

The scheme has been called out in the past for being discriminatory against those who may not be British citizens but who nonetheless have a legal right to rent property in the country.

These two legal challenges are being supported by the Residential Landlords Association (RLA), the 'national voice for landlords'.

Policy Director at the RLA, David Smith, said: "For the overwhelming majority of landlords it makes no commercial sense to limit their access to a large proportion of the prospective tenant market."

Smith continued: "It is the fear of criminal sanctions for getting it wrong which is causing many simply to want to play it safe. Landlords should not be used as scapegoats for the failures of the border agencies. It is time to suspend this controversial and unwelcome policy."

The Right to Rent scheme was introduced across England on 1st February 2016. It means that landlords must now check that all new adult tenants (aged 18 or over) have the legal right to rent residential property. The new rules don't just apply to tenants, but lodgers too. It is not enough for landlords to make the assumption that a new tenant is of British nationality, and it is illegal to only carry out a Right to Rent check if the landlord suspects the new tenant is not a British citizen.

To read the original commentary, please visit - www.plazaestates.co.uk/news/legal-challenges-to-right-to-rent-scheme



March


Landlords served MEES reminder ahead of next month

Landlords only have until 1st April to make sure their rental properties achieve an EPC rating of between A to E if they let them out for renewals or new tenancies.

The new minimum energy efficiency standards (MEES), which apply to both domestic and non-domestic properties, are designed to deal with the least energy efficient properties in the rental sector.

The new standards will benefit both landlords and tenants, as a more energy efficient property will be cheaper to run, which boosts its appeal for tenants, cheaper to maintain, and easier to sell.

ARLA Propertymark Chief Executive, David Cox, said: "the number of properties which are EPC rated F or G has fallen from around 700,000 in 2012, to 300,000 today. However, there are still a lot which don’t meet the standards."

Landlords are being warned that they face hefty fines if they continue to let out their properties as part of tenancy renewals and new tenancies if their properties don't meet the required new standards.

According to the ARLA, there is a shortage of rental supply in relation to demand, which could lead to higher rents for tenants, especially in London where demand remains strong. To help ease the 'supply crisis', landlords are being urged to make sure their properties can continue to be let out once the new energy efficiency standards come into force.

With the deadline looming, landlords don't have long to make sure their properties are as energy efficient as possible. More details on the new energy efficiency standards for domestic properties can be found here.

To read the original commentary, please visit - www.plazaestates.co.uk/news/new-mees-to-be-introduced-next-month



UK's most expensive flat for sale is in Knightsbridge


The most expensive flat for sale in the UK is listed as being in Knightsbridge, with a guide price of £4,950,000.

According to new research, unsurprisingly the most highly-priced one-bedroom flats in the UK can all be found in the capital.

Studio apartments and one-bedroom flats have become increasingly popular with London buyers especially. Many are choosing location and convenience over square footage.

Property listings on Zoopla reveals that 22% of flats priced at £1 million or more are in the Royal borough of Kensington and Chelsea.

These flats typically come with a wide range of benefits, including 24-hour concierge, but the key benefit appears to be location.

However, the London property market has slowed in recent years. Though overseas investors remain ready to invest in central London's prime market, the ongoing negotiations surrounding Brexit are not helping the movement of property sales.

These type of smaller, more compact apartments and flats in a unique central London location are more likely to be snapped up by business people who want to maintain a base in the area.

To read the original commentary, please visit - www.plazaestates.co.uk/news/most-expensive-flat-for-sale-in-uk-in-knightsbridge



April


Special Purpose Vehicles becoming more popular with landlords amid tax changes

More landlords are choosing to hold their properties within a Special Purpose Vehicle as a means of mitigating the impact of buy-to-let tax changes.

According to lender Roma Finance, more landlords are switching to a Special Purpose Vehicle with a view to minimise the impact of tax changes, which includes the reduction of mortgage interest relief and stricter lending criteria for portfolio landlords.

A Special Purpose Vehicle (SPV) is a type of limited company which enables landlords with a portfolio of buy-to-let properties to be as tax-efficient as possible.

In addition to a growing preference for SPVs, some landlords are also showing a preference for HMO properties as a form of investment and semi-commercial property.

Managing Director at Roma Finance, Scott Marshall, said: "The market in this segment remains upbeat with our share of lending on buy-to-let still strong for a wide range of property acquisition and refurbishment."

"Landlords and property investors have put in place new company structures and strategies to protect their portfolios and maximise future income and growth", Marshall added.

Landlords and investors, including those investing in London's prime areas, are proving resourceful in finding ways to minimise the impact of tax changes on their investment yields.

To read the original commentary, please visit - www.plazaestates.co.uk/news/growing-interest-in-spvs-among-landlords



Crossrail to turn Paddington into 'one of the best-connected areas in the capital'

Paddington is set to receive a boost with the opening of Crossrail (the Elizabeth Line), turning it into one of the capital's 'best-connected areas' and enhancing its appeal as a residential destination in central London.

Paddington is benefiting from ongoing regeneration as well as the coming of the Elizabeth Line, and there is potential for it to become a sought-after residential area on a par with nearby Bayswater or Marylebone.

All eyes are on the Paddington Waterside project and Paddington Quarter, where new bars, shops, cafes and restaurants are opening, bringing new jobs to the area.

Paddington has often lost out to its residential neighbours, struggling to attract buyers, but that may be about to change.

Paddington Station and its surrounding area are undergoing regeneration work, while the opening of the Elizabeth Line will further improve transport links.

Simon Howard, Sales Director for property developers Berkeley Homes, said: "Paddington and the wider area, including Marylebone, provide an attractive option for buyers, and Crossrail’s imminent arrival will only serve to strengthen this."

Howard continued: "The new Crossrail station at Paddington will make it one of the best-connected areas in the capital, which will naturally have a positive impact on both property value and demand."

The Elizabeth Line is due to open at Paddington in December 2018, when services will run through central London and terminate at Abbey Wood. The route will open fully from December 2019, providing direct links to Heathrow and multiple other destinations across London and beyond.

To read the original commentary, please visit - www.plazaestates.co.uk/news/elizabeth-line-opening-a-boost-for-paddington-area



May


London claims 57% of million-pound houses sales in 2017, as million-pound house sale numbers peaked in UK last year

The number of million-pound house sales peaked in the UK in 2017, and 57% of those sales took place in the capital.

According to house price data put out by Lloyds Bank Private Banking, more million-pound homes were sold in 2017 than any other year, with a 5% increase in 2017 when compared with the previous year.

The data suggests that confidence is returning, with buyers making decisions as opposed to putting off such decisions.

The London market has slowed at the top end of the market, with investors possibly discouraged by stamp duty increases for million-pound properties, while Brexit uncertainty may also be a contributing factor.

Head of UK Wealth Lending at Lloyds Banking Group, Louise Santaana, said: "Overseas investors represent a good share of this end of the London market and some may be holding off buying, pending further clarity over Brexit".

Santaana continued: "With the Government consulting on ways to improve the house buying process, we should see high-end home owners more empowered to engage in property transactions."

Also revealed by the data is the rise in the number of million-pound properties across Britain over the last decade – an increase of 73% between 2007 and 2017.

To read the original commentary, please visit - www.plazaestates.co.uk/news/rise-in-number-of-million-pound-house-sales-with-57-in-london



Demand for properties priced at over £2million increasing

Homes sold over the last three months in prime London areas have seen prices rise by 3.2% when compared with the same period last year. This applies to properties priced at £2million or more.

According to data from LonRes, a reversal has taken place. Now, properties priced in excess of £2million are seeing price growth, while by contrast, homes sold for under £2million during the last three months have seen price falls of 5.8% on average.

This is good news for vendors at the higher end of the market, and shows that demand for such properties remains, especially in London's prime areas, such as Mayfair and Belgravia.

Head of Research at LonRes, Marcus Dixon, said: "Demand for these properties [priced above £2million] appears to be increasing, prices having fallen earlier and buyers, many of whom are owner-occupiers, have begun to see value, even with Brexit uncertainty still looming."

As demand continues in London's prime areas, property prices remain robust, especially for properties priced in the higher price bracket.

However, overall house prices fell by an average 3% in prime London when compared with the same period last year, but the number of transactions has increased by 3% this year when compared with last year.

To read the original commentary, please visit - www.plazaestates.co.uk/news/demand-for-properties-priced-at-over-2-million-increasing



August


Government launches consultation to check efficiency of EPCs

The government has launched a consultation into the current performance of Energy Performance Certificates (EPCs) and how they might be improved.

The Department for Business, Energy and Industrial Strategy recently published details of the consultation and why it has chosen to seek evidence on how EPCs might be improved.

The government aims to establish 'how EPCs currently perform against three attributes: quality, availability, encouraging action to improve energy efficiency'.

The call for evidence document also lists recommendations for improvements, but the government is keen to hear anyone who uses EPCs regularly, which includes landlords in both the domestic and commercial private rented sector.

As landlords are required to present new tenants with an EPC of the property, landlords may wish to get involved in the consultation and express their views as to how EPCs can be more effective.

The Ministerial Foreword included in the call to evidence document reveals the motivation behind the consultation: "EPCs have the potential to do even more. New sources of data and information, including from smart meters, could allow EPCs to more accurately reflect energy performance, whilst other changes could help make EPCs and the data underpinning them more accessible to people."

The foreword continues: "EPC ratings could also underpin an evolving market in ‘green mortgages’ and other green finance products, allowing people to benefit financially from better performing properties."

Both landlords and tenants benefit from 'better performing properties', and this consultation is the latest push by the government to improve energy efficiency across the private rented sector as a whole.

To read the original commentary, please visit - www.plazaestates.co.uk/news/government-consults-on-performance-of-epcs



September


Property buyers pay premium prices to live near top schools

It costs £70,000 more to live near one of London’s best-performing state secondary schools, a recent study from Santander Mortgages reveals.

Properties located within the catchment areas of some of the capital’s best schools are priced on average 15% higher than homes not located within a catchment area.

It’s nothing new that good schools and higher property prices go hand in hand, and that many parents are guided by where the good schools are when choosing where to move their family to.

Some parents have chosen to downside when buying a new property in an area where property prices are higher due to proximity to good schools, while others have chosen to put up with a longer commute to work for the privilege of sending their children to a good school.

Managing Director of mortgages at Santander UK, Miguel Sard, said: “If families are looking to move into a catchment area specifically to boost their chances of getting into an elite school, they can expect to pay a hefty price”.

Sard continued: “Parents are prepared to sacrifice a lot to give their child the best start in life.”

According to the research, some parents try to give the impression that their children live within a certain catchment area to give them a better chance of getting into a preferred school, while others will rent a property in a catchment area as a means of getting their child into a local school.

Though many of the capital’s best schools listed in this study are in outer London boroughs, there are many prestigious schools in the Knightsbridge/Paddington areas. These include the Knightsbridge School, a preparatory school, while the King Solomon Academy near the Edgware Road is a state school which has consistently been rated ‘Outstanding’ by Ofsted.

To read the original commentary, please visit - 
www.plazaestates.co.uk/news/premium-prices-for-properties-near-top-state-schools



New data reveals the cost of city centre flats around the world

London is the world’s second most expensive city to buy a centrally-located flat in, new data reveals.

According to research from personal finance comparison website Finder.com, the average price of a two-bedroom flat in London is £788,000, which is four times more than the UK average.

The world’s most expensive city in which to buy a city centre flat is Hong Kong, where buyers can spend on average £1,290,000 for a two-bedroom flat.

After Hong Kong and London, Singapore is the world’s third most expensive city in which to buy a two-bedroom flat in the centre of the city. This is followed by Beijing, Zurich, Shanghai, New York, Seoul, and Geneva.

Globally, Hong Kong is the most expensive country to buy a city centre flat in, and this is followed by Singapore, Switzerland, South Korea, Japan, Taiwan, Israel, Norway, China, and Sweden.

Of the countries with available data included in the research, the cheapest country in which to buy a city centre flat is Egypt, where the average price of a two-bedroom flat is £27,000.

Though London does feature as one of the world’s most expensive cities in which to buy flats, this is good news for sellers or property investors with a central London flat in their portfolio.

And despite uncertainty due to Brexit, demand for rental flats in London, especially in central London, remains strong.

To read the original commentary, please visit - www.plazaestates.co.uk/news/city-centre-flats-cost-around-world



October


Tax changes needed to incentivise downsizing, RICS says

The Royal Institution of Chartered Surveyors (RICS) is calling on the government to make changes to stamp duty to encourage people in larger properties to downsize.

RICS has suggested the government should make people moving from larger properties into smaller properties exempt from paying stamp duty. This, in turn, would get the sales market moving, especially in central London, where sales market activity has slowed in the last few years.

In the latest market survey from RICS, almost half suggested making changes to council tax in addition to stamp duty, as this would help people who want to gain a foothold on the property ladder.

RICS Policy Manager, Abdul Choudhury, said: “If we consider tax in terms of how they disincentivise certain behaviours, SDLT makes purchasing, moving and making more effective use of stock costly at a time when we need all these things.”

Choudhury continued: “Providing a stamp duty land tax exemption for downsizers could free up larger, underused properties; but will likely provide them with a market advantage over other participants.

“Similarly, replacing stamp duty land tax with council could increase house buying and selling activity; but increase day-to-day living costs at a time when occupiers are already facing higher bills.”

The RICS survey revealed that many think encouraging people to downsize through tax incentives would get the market moving and free up stock where it is needed.

As such, the professional body is calling on the government to review the entire stamp duty tax system to ensure it best serves market needs.

With the Budget set to be delivered later this month, we’ll have to wait and see what – if any – changes are implemented.

To read the original commentary, please visit -
www.plazaestates.co.uk/news/rics-calls-for-stamp-duty-changes



November


The Budget 2018 and what it means for London buyers

In the Chancellor, Philip Hammond’s last Budget before Brexit he signaled the end of the long era of austerity, announcing income tax cuts and spending on the NHS, roads and social care. But what does it mean for anyone looking to buy or sell in London in 2019?

In his budget speech the Chancellor acknowledged that tackling the housing shortage is crucial to the economy. “We can’t resolve the productivity challenge or deliver the high standards of living the British people deserve without fixing our housing market,” he said, before outlining a package of measures:

Help for first-time buyers

Mr Hammond announced the abolition of stamp duty for first-time buyers of shared ownership properties priced below £500,000. The measure follows last year’s Autumn Budget, when the Chancellor removed stamp duty on homes worth up to £300,000, for first-time buyers. According to Mr Hammond, this has so far helped 121,500 people onto the housing ladder, bringing the number of mortgages for first-time buyers to an 11-year high.

The Help to Buy equity loan scheme - which offers first-time buyers of new-build properties government loans of up to 40% in London, was due to end in 2021 – it will now be extended until 2023.

Homes on the high street

Mr Hammond announced a £675m fund to help councils transform struggling high streets with part of this money to be used to turn empty shops into homes. To facilitate this, he promised consultation on simplifying the planning process for converting properties from commercial to residential use.

Increasing the housing supply

An extra £500m was pledged for the Housing Infrastructure Fund – which helps councils put in place the roads and power supplies that enable housebuilding. The money will help deliver 650,000 more homes.

To read the original commentary, please visit - www.plazaestates.co.uk/news/budget-2018-housing-and-what-it-means-for-london-buyers

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