General elections and other political headwinds are predicted to temper property growth come 2015.
The prospect of the May elections is contributing to slowed property growth, with property prices expected to rise at a moderate 5% next year. The growth in prime central London locations, however, may be a little more stagnant with property firm Strutt & Parker expecting a growth of 2% in 2015. This is a massive change from the booming central London property market of 2010/2011.
Property agents are confessing to a slowdown in certain areas as both buyers and sellers wait to assess what effect the election, and possible mansion tax introduction, will have on prices. However, Stephanie McMahon, head of research at Strutt & Parker, believes that the outlook for 2015 is not at all a gloomy one:
“Agents are reporting a continued slowdown in some areas as buyers and sellers nervously await news on the upcoming general election. This is beginning to feed through into transaction levels. As is often the case in uncertain times, it may also be that transaction levels will decrease in the run up to May 2015, but values could hold up better than expected,” says Stephanie McMahon, head of research at Strutt & Parker (source: Property Wire).
Another estate agency also reporting dramatically slowed growth in London, Countrywide, confirmed Strutt & Parker’s assessment. It forecast that the market would remain uncertain in 2015 due to the general election, ‘the prospect of interest rate rises...and the general economic backdrop’ (source: ft.com).
Housing prices are set by the simple economic rule of supply and demand. Owing to a huge influx of foreign capital in London in recent years and a recovering economy, demand, particularly in London, has been high. However, government has done well to keep us with this demand. “On the supply side, the government is continuing to boost house building across the country, and recent output figures from the construction sector reflect this,” says McMahon. The Bank of England’s tighter rein on mortgage lending is also serving to temper the unsustainable growth by decreasing realistic demand.
However, the economy is expected to pick up in 2015, according to Robert Gardner Nationwide’s chief economist, which will positively impact upon house prices. Buyer interest is likely to be boosted by increasing consumer confidence, strong employment figures and the prospect of higher earnings come 2015, according to Gardner.
‘Above and beyond the general election there are a number of other potential headwinds slowing the property market, including talk of interest rate changes and the Mortgage Market Review (MMR) and the slowdown it is causing,’ says McMahon.
Homeowners, particularly in central London, may be lamenting a more tempered growth in their equity; however, experts believe that a more stable property market is desirable. While stability is only likely to be achieved after a number of political decisions are concluded, prospective buyers can expect a range of slightly more affordable housing options come 2015, especially if the construction industry can keep pace with demand.