The buying frenzy of 2014 has certainly chilled. It is accepted that the house price bubble is not sustainable and there is a conscious move towards not repeating mistakes of the past.
The past few years have been characterised by an influx of high value purchases by overseas individuals, taking advantage of the fact that purchasing property for £5 million plus greatly assisted with securing citizenship. We are likely to see a more cautious approach at the top end of the market as a result of uncertainty surrounding mansion tax and changes to visa requirements which require a minimum investment of £2 million in a UK company or UK government bonds. Clients are also giving careful thought to what they are prepared to offer for a property given that the Stamp Duty reform had an adverse impact on purchases over £938,000.
Agents are reporting a higher number of enquiries by first time buyers, which suggest a thaw in the bottom end of the market. This tier has welcomed the Stamp Duty reform together with the introduction of advantageous mortgage products and the move by some banks to fix their interest rate at a low level. There is growing consensus that buyers are no longer to be left out in the cold, but this is now their time and their market. As a result, sellers must have realistic expectations as to their property value, particularly in London where property prices have reached an affordability ceiling.
The buy to let market however is unlikely to thaw until Spring. Last year saw the introduction of stringent lending criteria by the Mortgage Market Review and there are ongoing calls for rent caps. As a result, investors are likely to cool off building on their property portfolios until the new pension freedoms come into effect in April.
For now we can expect to see the ‘cold feet’ and cautious approach which typically accompanies the months before an election.
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