Research Articles

Budget 2012 - Key Points

Wed, 21 Mar 2012 23:02:00 GMT

London, 21 March 2012. The 2012 Budget was fiscally neutral. Despite recent economic data released suggesting the economy is beginning to improve, the announcement by the credit ratings firms Moody and Fitch to place the UK on “negative watch/outlook” was at the forefront of George Osborne’s mind and he stuck rigidly to his deficit-cutting plan.

The Office of Budget Responsibility revised its UK growth forecast up from 0.7 per cent to 0.8 per cent in 2012 and 2.0 per cent in 2013. UK inflation is forecast to fall from 2.8 per cent in 2012 to 1.9 per cent in 2013.

Key points impacting the property market include:

A new stamp duty level of 7 per cent was announced for residential properties over £2m from midnight today. Any such homes purchased through an off-shore corporate structure will be liable for 15 per cent stamp duty.
The Government will extend the capital gains tax regime to gains on the disposal of UK residential property and shares/interests in such property by non-residents.
Government support for £150m of tax increment financing to help councils promote development which will help to deliver 3,000 new homes.
Osborne commented that some companies are using the VAT rules that exempt the rental of land to avoid tax that their competitors are paying which may have implications for both taxpaying funds and non-tax paying organisations such as charities and trusts.
The abolition of the 50 per cent tax on those earning more than £150,000 per annum was announced and from April 2013 will stand at 45 per cent.
The personal tax allowance will be raised to £9,205 in April 2013, an increase of £1,100.
Corporation tax will be cut to 24 per cent in April 2012 and will reduce to 22 per cent by 2014.
A new general anti-tax avoidance rule will be introduced.

Catherine Penman, head of Research comments “The introduction of the new level of stamp duty and the 15 per cent payable for a residential property purchased via a corporate structure is a bullish decision. The effect on these rises will be most prominent in London which typically accounts for circa 85 per cent of property sales over £2m within the UK”.

Richard Liddiard, head of Rural Agency comments “The stamp duty changes will have minimal effect on agricultural land market as it only applies to residential properties in excess of £2m. Activity from overseas buyers in the farmland market is predicted to continue. The quality of life issue is still predominant in their minds and at the moment they are being taking on by commercial farmers who are very active in the marketplace”.

Carter Jonas Prime Central London Residential Lettings Report - Spring 2012

Fri, 16 Mar 2012 15:29:00 GMT

The year has started on a positive note for both the Central London sales and lettings markets with increased levels of activity recorded across both divisions. However, despite the three year anniversary of historically low interest rates at 0.5% a growing sense of realism has been witnessed during the first quarter. This caution has stretched to the upper end of the market which remained largely immune in 2011, impacted by the ongoing economic uncertainty.

That said, forecasts for both markets remain positive for 2012, although a growing divergence between prime and secondary product is projected to emerge within the sales market throughout the year. The Olympic Games will be the key driver behind forecast growth within the lettings market.

PRIME CENTRAL LONDON LETTINGS MARKET

Despite a continuing shortage of stock, in line with the sales market, the Central London lettings market has witnessed a more buoyant start to 2012 compared to a muted end of 2011.

However, the market remains sporadic. The mid range market (£700 - £1,500 per week) has witnessed a 5% rise in rental levels since year end, driven by an increase in applicant numbers against a restricted supply pipeline.

In contrast, a notable slowdown in demand and rental levels achieved for upper end stock (properties over £2,000 per week) has been evident due to a lack of enquiries. This slowdown has been initiated in part by an increasing sense of realism within the corporate market, the mainstay of the sub-sector. Whilst quoting prices have yet to formally reduce, landlords are becoming increasingly realistic in terms of value and are likely to accept between a 5-10% reduction compared to six months ago.

The £400 - £700 per week bracket continues to draw a steady stream of enquiries and tend to let relatively quickly providing product is well presented and realistically priced.

The Olympic Games has yet to impact the lettings market. Short-term lets typically command a premium of between 30 and 50% compared to long-term lets within the Capital although proposed increases of up to 300% have been quoted during the summer months. Demand for such lets is expected to be activated over the forthcoming months and will prove the key driver behind the 5-10% projected growth in rental levels across Central London during 2012.

Carter Jonas Prime Central London Residential Sales Report - Spring 2012

Fri, 16 Mar 2012 15:34:00 GMT

After a slow start to 2012, the prime Central London residential market gathered momentum in late January with activity levels reportedly returning to average long-term levels. Encouragingly, in recent weeks a significant number of properties have come to the market, providing a welcome addition to the very restrained stock levels evident across the Capital. However, despite this rise the market is still way off plentiful stock levels.

“Best in class” product continues to command premium prices and indeed is setting precedents in terms of values which now stand well above 2007 levels. That said, purchasers are becoming increasingly selective across the market, including properties over £5 million.

Viewing numbers across our five Central London offices rocketed by 256% between the end of December to end of January 2012, with Holland Park and Marylebone offices witnessing particularly notable increases during the month. Consequently, the ratio between viewings and offers across Central London as a whole improved from mid February and has maintained its level since.

Activity within the £2 - £5 million bracket slowed during Q4 2011 although has since picked up pace into 2012. Availability of properties up to £2 million remains in very short supply and consequently when product comes to the market, irrespective of quality, it tends to sell immediately.

Pricing for properties over £5 million has held firm since the beginning of the year, although has been subject to a growing sense of caution with purchasers becoming more price conscuious.

In contrast to recent demand profiles, English purchasers have become more active within the market since the start of 2012 and have been responsible for a recent flurry of activity, principally at the top end of the market. This activity has followed a long period of monitoring and speculation, with London’s continuing “safe haven” status undoubtedly assisting in their decision to progress.

Despite the growing sense of realism across the market, demand is forecast to remain buoyant during the year and values for prime product are projected to rise by 5-7% by the end of 2012. There continues to be huge expectations on values achieved, particularly in Mayfair, with a number of new developments expected to quote between £4,000 - £4,500 per sq ft (a staggering 30% above record levels achieved in 2007). That said, a growing divergence between the best and the rest is predicted to emerge, with secondary product, particularly over £2 million, beginning to stagnate.

Carter Jonas Prime Central London Residential Sales Report - Winter 2011

Tue, 20 Dec 2011 16:52:00 GMT

Despite the growing economic gloom, the Prime Central London residential market has continued to shine in 2011 and our forecast indicates another prosperous year ahead.

In contrast, the lettings market has witnessed a more subdued latter half of 2011 and activity is expected to remain restrained over the Christmas period. However, this downturn is expected to be relatively short lived and activity is forecast to improve moving into Spring 2012.

Sales
The sales market for Prime Central London (PCL) residential properties has continued to strengthen during 2011, despite the downward trend in the overall UK housing market and general economic gloom.

Prices are now above 2007 levels following an 8 per cent increase so far this year, and are forecast to peak at 10 per cent by year-end for the best quality properties. The market has increasingly favoured buyers, and only properties at the top end of the market are achieving these levels.

An acute shortage of very high quality homes continues while demand has remained generally stable. In some cases, there has been an increase in demand thanks to favourable exchange rates and foreign investors viewing London as a safe haven.

Overseas buyers account for 68 per cent of purchasers to date in 2011, with Middle Eastern and Russian buyers being the most active and Indian investors beginning to enter the market.

The sales market for properties valued at up to £2 million has experienced a notable increase in activity, mainly due to purchasers being able to fund cash transactions. The £8 million+ market has also enjoyed a healthy year, with high-end properties selling promptly and above guide price in some cases.

However, the £2-£8 million sector has seen a slowdown throughout the year, principally because of the uncertainty within the financial services industry which traditionally provides the bulk of the buyers in this price bracket. This hiatus is expected to continue for the foreseeable future.

Overall, the Central London residential sales market is expected to continue to benefit from these buoyant conditions for some time, as foreign investors and continued low interest rates contribute to a predicted 5 per cent growth for 2012. The uncertainty surrounding the Eurozone may have a negative effect in the short term, but is not forecast to depress the market as a whole.

Carter Jonas Prime Central London Residential Lettings Report - Winter 2011

Tue, 20 Dec 2011 16:52:00 GMT

Despite the growing economic gloom, the Prime Central London residential market has continued to shine in 2011 and our forecast indicates another prosperous year ahead.

In contrast, the lettings market has witnessed a more subdued latter half of 2011 and activity is expected to remain restrained over the Christmas period. However, this downturn is expected to be relatively short lived and activity is forecast to improve moving into Spring 2012.

Lettings
The first half of 2011 proved healthy for the Central London lettings market as rents increased by 12 per cent from their mid-2010 levels. However, the market has remained sluggish since the summer and the number of enquiries is down 19 per cent compared to August.

The main cause of the slowdown is thought to be a mismatch between landlords’ expectations and tenants’ budgets. The result is likely to be an increase in supply in the early part of 2012 which will restrain or lower rents by 5-7 per cent for the first six months. But rents will still be significantly higher than their mid-2010 levels following sharp rises from 2009.

Because of the major increases since 2009, many tenants are choosing to stay put and renegotiate rents down to below headline rates. Therefore, the supply of good quality properties remains restrained, although likely to increase during early 2012.

The downturn in lettings is forecast to be relatively short-lived and activity levels are expected to recover by the spring of 2012. Demand will rise thanks to European tenants attracted by the UK’s comparative stability as well as the flexibility of short lets. The London Olympics will also provide a significant boost to demand in 2012, with rents expected to rise by up to 5 per cent from the middle of year.