The market this year is likely to be affected by a number of factors.
Uncertainty surrounding the May general election is likely to have a bearing on sentiment during the early part of the year, particularly in the more prime residential markets. The prospect of a mansion tax has not faded completely – although the arguments in favour of its imposition have been diluted by the recent changes in stamp duty. With a top rate of 12% and a biting point of £937,500, it will be hard for Labour or the Lib Dems to argue that higher value homes are not sufficiently taxed. Looking retrospectively, only 83 lots in 2014 (5.3% of the total) would have drawn a higher tax bill under the new regime. The Government estimates that this year 98% of buyers will actually pay less SDLT. On this basis, we do not see the auction market being heavily impacted.
Interest rates may rise this year but are unlikely to exceed 1% (particularly in the wake of falling oil prices and the consequent drop in inflation). Any influence this may have on levels of repossessions will not be noticed until 2016 or later as lenders will continue to operate a policy of forbearance. For new borrowers, following the Mortgage Market Review (MMR), mortgagees will be required to verify income and perform an interest rate sensitivity assessment before lending. This will impact on deposits required for purchase. The Help to Buy scheme, which to date has supported more than 38,000 households and has now been extended to 2020, will counter balance this to a degree.
For those who have cash, or can raise adequate funding, auction will continue to be an increasingly popular way of buying a home. Private buyers will look for opportunities to add value to unmodernised properties. The auction room has become demystified over recent years thanks to TV shows such as Homes under the Hammer. Educated bidders are now willing to embrace the process and will continue to compete enthusiastically.
London prices will continue to improve but at a softer pace than those in the regions. Outside of London, hot spots are likely to be along existing and future major commuter routes, particularly Crossrail. The larger conurbations with healthy tenant demand will also see sustained growth as occupiers, investors and tenants are priced out of the capital. A general dearth of new housing stock in the short term will push capital and rental values further.
London will continue to be a safe haven for foreign money. It remains to be seen how far the removal of the CGT exemption for non-resident purchasers will affect prices. Prime central London is more at risk but this sector is less prevalent in the auction room. In any event, only gains arising after April this year are taxable.
There will be far more positive than negative influences in 2015 and we look forward to bringing buyers a rich and varied selection of opportunities in the months ahead. As always, we shall endeavour to select appealing lots at attractive prices.
We anticipate another exciting year.