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TODAY'S OTHER NEWS

Sales plummet thanks to Brexit and taxes says investment guru

Transactions across England and Wales in September dropped 7.6 per cent year on year while Prime Central London now sees fewer than 70 sales a week - and one investment guru puts it all down to the ongoing political and economy uncertainty gripping the country.

London Central Portfolio, a property investment consultancy, pulls no punches when it comes to saying where the blame lies for these figures, which are roughly the same as they were at the worst point in the global financial crisis of 2008 to 2013.

“Market sentiment has not been restored by the government’s policies or handling of the Brexit negotiations. In what is already a heavily taxed landscape the government believes there is still room to add further taxes directed at the overseas investor. This does not seem to be the right message for the government to be sending to the outside world with Brexit looming” claims Naomi Heaton, LCP’s chief executive.

“Undoubtedly it flies in the face of the ‘open for business’ slogan the Prime Minister previously used at the G20 summit in 2016” she adds.

“It’s hard to see how this decline in transactions can be reversed until there is an agreed outline plan for Brexit. International buyers, already affected by successive tax increases and now exposed to negative coverage of the current political situation, are holding back” she warns.

Nevertheless, she says the high value sector is seeing a better performance now than in some recent times, with the weakness of sterling and the high absolute levels of discounts encouraging homeowners, in particular, to enter the market.

“On the other hand, rental investors, who underpin the lower value end of the market are biding their time. It is likely that when sentiment improves, prices in this sector will harden quickly” Heaton believes.

She warns that there is little cause for optimism.

“Growth has been stifled by the government’s failure to give a clearer picture of what a post-Brexit landscape will entail for homeowners and investors alike. Those who have been sitting tight will have seen very little to encourage them to take the plunge in the current climate, particularly as the growth in the value of their own property has been nominal.”

By contrast estate agency chain Haart gives a very different view of the market claiming that prices have increased by nine per cent since the June 2016 EU Referendum and claiming the company is now recording transactions “at their highest for two years”.

“EU or no-EU the need to move home will always be there…Brits move for a whole host of reasons including good schools, new jobs and better transport links … Brexit is not a word our branches are hearing on the ground anymore, but instead, customers are much more focused on what is happening with interest rates and stamp duty, and for investors, the recent tax changes” claims Paul Smith, Haart’s chief executive.

Over the weekend a prominent London buying agent - Caroline Takla, managing partner of buying agency The Collection - called for a second EU referendum saying: “The Brexit negotiations are going extremely badly and we are hurtling towards a no deal, which would hinder the property market significantly.”

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    Three inaccuracies in this "report": 1) London property is very lightly taxed by international standards (not "heavily taxed") (can supply graphics if you need), 2) Prices cratering in London have nothing to do with Brexit. Prices are falling for the same reason any price falls in an open market - they were, and are, much too high - and people now see that. 3) I don't agree that the Government hasn't been clear about the 'post Brexit' landscape for property. It seems pretty obvious to me that they want an unwinding of the speculative bubble which inflated post Crash. What the Government wants it usually gets.

    Matt Faizey

    It does indeed.

    Which is why I'm wondering just how rampant inflation might eventually be....

     
    Rob  Davies

    The government doesn't have a clue what it wants when it comes to Brexit. It's just making it up as it goes along, hoping for the best and seemingly settling for the worst (or least worst) option.

    I also somehow doubt the government want the house bubble bursting. Things are going to be messy enough post-Brexit (if it ever actually happens; here's hoping it doesn't) without a housing market crash to worry about.

     
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    The main reason the market has become so stifled is due the huge amount of SDLT that has to be paid on a purchase which has stopped people moving particularly in London and the Home Counties. The BTL tax changes have also had a dramatic effect on this sector and not Brexit while H2B has fuelled the lower end of the new build market. The government needs to reform both SDLT and tax on residential investment properties to get the market moving again and increase stamp duty tax receipts.

    Brit Miller

    Over the last 30 years buy to let was eating up huge amounts of the property market. We became a country of renters rather than home owners which is a big vote loser for the government, they had to act. Also buy to let homes typically come to the market less than residential owners, so with a big buy to let section estate agent transactions fall however many make it back through property management.

     
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    The Government doesn't "need" to do anything except wait for prices to come down to levels where normal people can buy them. It was always outrageous that a private individual could claim a corporate tax relief on business interest. The Government merely ended a huge and unfair anomaly. And it isn't going to ever put it back I can ssure you. As for SDLT, I refer to my point above. Compared to international norms UK top end property is very lightly taxed.

     
    Rob  Davies

    @James Walsh - but the buy-to-let market isn't declining. The stats suggest there are now more buy-to-let landlords in the UK, despite the stamp duty surcharge and the phasing out of mortgage interest tax relief. People still see property as a safe bed and a sound investment, even in these troubled times. They are preferring to put their money into housing over stocks, shares, bonds or pensions.

     
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    To encourage the market to come back - they need to relax lending requirements and bring back 95-100% mortgages, at same time remove help to buy and allow people to get a mortgage that covers the entire amount.

    Brit Miller

    I agree with removing help to buy but returning to loose lending just fuels property bubbles. Stricker lending leads to lower house prices & a healthier more sustainable housing market.

     
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    Agree that Help to Sell is ludicrous. But 100% mortgages right at the top of the cycle with interest rates rising and house prices falling in many areas, are you insane?

     
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