News & Views

A FLAT IN LONDON

Posted on 30th October 2018

Brexit may be a blessing for those thinking of buying a home in London. Its effect on London property prices and overall weaker pound makes property ownership in London and its commuter belt an attractive proposition particularly for those wishing to buy for themselves rather than for speculation. According to the Guardian, property prices in London, although still the highest in the UK, has fallen through 5 consecutive quarters due to uncertainty over Brexit and the higher stamp duty on second homes. Nonetheless, for first time home owners and those able to afford the higher duties, London remains attractive and alluring.

The UK government’s recent decision not to bring in further Stamp Duty Land Taxes (SDLT) for foreign buyers in its last budget may also served to encourage would-be homeowners in the UK to take prompt action and consider buying sooner rather than later (see report from our UK member firm Edwin Coe LLP: https://www.edwincoe.com/blogs/main/sdlt-and-the-autumn-budget-2018-a-sigh-of-relief-for-overseas-buyers/)

For those looking for better capital gains, most property analysts agree that property prices in the North West of UK will go up much faster than London properties and as much as 21.6% over five years. It is believed that most of UK outside London is also set for double digit growth (on the average of about 14%), compared to London’s 5% to 10% growth estimate in the same period due to concerns over Brexit.

These trends reverse the price growth pattern of UK property over the last 10 years where London property prices grew by 72%, compared to just 1.9% in the North over the same period. However, the Guardian notes that “Despite the falls in London, property prices in the capital are only 3% below the record highs achieved in early 2017, and are still 50% higher than they were in 2007 before the financial crisis.” The average property price in London is £476,752 (June 2018) which is nearly double the national average.

Although the Guardian believes that the return to growth in London overall will take far longer than expected, the London market has always proven to be resilient and has consistently bounced back due to a constant stream of international buyers wanting a home in London regardless of economic factors and the number of those able to pay the cost without the need for financing. Therefore, with house prices in London continuing their decline, foreign buyers with the means may still continue to invest in what they perceive as a “good opportunity”.

One other asset class that seems unaffected by Brexit is UK student accommodation which has shown strong growth and demand through 2017 and 2018 and continues to keep property lawyers (including ourselves) busy. This has been put down to the continued strong demand for high quality UK tertiary education particularly in major cities such as Manchester, Bristol and Birmingham. Investors in student accommodation are also not required to pay the higher SDLT levied on second properties and this together with higher yields makes this a very attractive asset class for investors. A large proportion of student accommodation come with management contracts that allow investors to buy-to-let with guaranteed yields of up to 10% per annum.

RLSE UK Conveyancing Team (RLSE provides English conveyancing services in Malaysia and Singapore at competitive rates.)