Be property-led not market-driven
15 April 2015
Twenty one days and counting. From a property perspective, the run up to the 2015 election seemed to get off to a horribly early start when the idea of a mansion tax was flagged up all those months ago. And yet in spite of a lot of wind being taken out of Labour’s sails by the Government’s substantial changes to stamp duty in December, the only certainty about the forthcoming election seems to be uncertainty.
As a buying agent a large part of our service is giving advice to clients based on an in-depth market knowledge. For the vast majority who are not affected by the threat of changes to the non-domicile tax regulations, this pre-election moment offers real opportunities which will dissipate once we have a result on 7th May.
The election and the unpredictability about its outcome has become the focus across the economic spectrum for any number of cautious responses including estate agents blaming it for a more muted property market. With daily reminders in all the media about this being one of the closest elections to call, the possibility of a hung parliament is inevitably exacerbating the situation.
Over the years I have seen too many people miss out because they’ve allowed themselves to be dictated to by the market. The right property should be the guiding principle and if you needed reassurance about the current climate, far from being a deterrent, there are many positive reasons to buy now.
In recent years there has been a frenzy around buying property with buyers finding themselves in competitive bids after a first viewing. For the first time in a long while, the market is less competitive, enabling buyers to take a more considered approach to their purchase.
Vendors selling in a quieter market tend to be more committed to a sale which often allows for an element of negotiation. Changes in stamp duty have also led to many vendors at the higher end of the market being happy to take some of the impact. Post-election these changes will become more absorbed into the psyche and provide less opportunities for negotiation.
As an observation, property prices have a tendency to fall, or at the very least remain static, in the run-up to an election but once certainty is back on the agenda, regardless of which party wins, prices start to creep up again. This view is supported by our parent company, Savills, which is predicting that there will be an increase in London property values over the next five years of around 20%.
The skeleton in this election cupboard is mansion tax. But in the event that there is a coalition government, which by their very nature have a tendency to be more conciliatory, my prediction is that if a mansion tax even gets on to the political agenda it will be in a watered-down version.
The other concern flagged up in the media is when, rather than if, there will be an interest rate rise. At a time when we have had historically low interest rates any increase is predicted to be incremental and small. There continue to be some excellent rates on the market including, for those who want constancy, many favourable fixed rate mortgages.
Fundamentally, though, my advice is to be property-led and not market-driven. If it is a home you are buying a different set of rules apply which fall outside the parameters of general elections and market trends. But rest assured, any emotion attached to a London property can be counteracted by the knowledge that the London property market continues to be a tried and tested investment for your capital.