The FTSE exceeded the 6,000 mark on Christmas Eve for the first time since May 2008, marking an important point of progression in terms of returning confidence to the wider UK economy. A notable proportion of the uplift, since the BP driven crash over the summer, is likely to be spent on London property and commutable country houses during the early part of 2011. In addition, bonuses from the financial services sector are anticipated to reach £7 billion in 2011, according to Centre of Business Research (CEBR).
This is only a 5% reduction from 2010 levels which proved to have a notable beneficial impact on the London and prime regional markets and therefore bodes well for the short-term house price forecast. Indeed, the London market is already witnessing a buoyant period, in terms of achieved prices and enquiry levels and this is expected to ripple out to the commuter belt over the forthcoming months.
Demand for 'best in class' houses is expected to remain high whilst supply continues to diminish. This is likely to result in premium prices being paid for top quality stock, although a widening divergence between the best and the rest is expected to appear with purchasers becoming increasingly discerning and price sensitive.
The increase in Stamp Duty Land Tax in April 2011 from 4% to 5% for properties valued over £1 million is expected to have the most pronounced impact on houses in the £1 – £1.5 million price bracket. Pressure will be applied to some vendors to reduce prices wherever possible to a figure just shy of the ceiling and a flurry of activity is therefore anticipated prior to April followed by a temporary lull shortly afterwards.
However, with the likelihood of an increase in interest rates seemingly rising on a daily basis, the housing market remains tentatively poised. That said, there are currently a surprising number who are ready, willing and able to move and who are frustrated at the lack of supply of fresh stock.
We therefore recommend those considering selling to place properties on the market sooner rather than later. The best house prices in 2010 were achieved in the first third of the year, and we anticipate 2011 to follow a similar pattern.