Demand is down for the 12th successive month according to the latest market survey by the Royal Institution of Chartered Surveyors.
New instructions from sellers declined for the seventh consecutive month.
Prices are flat nationally but there are major regional variations with London seeing the sharpest fall in prices, according to the surveyors.
Respondents in the South East of England, East Anglia and the North East of England also reported prices to be falling, but to a lesser extent than in London.
Prices increased elsewhere in the UK in the last three months.
However London remains the only region where RICS members expect prices to be lower in a year’s time with the North West of England, Wales and Scotland are expected to see the largest price rises in 2018.
Agents quoted in the RICS report are outspoken in their comments.
“Stamp duty and Brexit have killed the fluidity of the London market. Only when the extent of the resulting economic damage is properly understood will things be able to change for the better” says Toby Whittome of Jackson Stops, in London.
In response to drifting rental market measures from RICS, Andrew Pearce of Millennium Properties in Wolverhampton says: “Demand is at an all-time high but supply is dwindling with tax changes, stamp duty and soon agents being unable to charge for essential reference searches. A crucial sector of the housing market is being badly led – to the detriment of landlords and tenants.”
Overall, RICS says its latest market snapshot suggests the next Bank of England interest rate rise may be delayed.
“The results provide little encouragement that the drop in housing market activity is likely to be reversed any time soon. It has the potential to impact the wider economy contributing to a softer trend in household spending” warns Simon Rubinsohn, chief economist at RICS.
“This could make Bank of England deliberations around a May hike in interest rates, which is pretty much odds-on at the moment, a little more finely balanced than would otherwise be the case.”
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I would like to add to Toby's comments as to the reasons why the Prime Central London market is in the doldrums. Added to Brexit and SDLT are the implications of no tax relief on buy-to-let investments, killing off those who might have put their pension in bricks and mortar. Mortgage interest tax relief will gradually be cut back to 20% between 2017 and 2020. So after paying fees and service charges it has become a near pointless exercise. Another case of the government attacking pensions. As for when you die, they want another 40% and in the case of Prime Central London property, foreigners domicile has now been reduced to 15 years from 17, which whilst only a difference of two years has added another reason to stay away. The government is losing 20% (VAT) on every single transaction connected to the sale of a property in Central London and as trades are down 75% that is not insignificant.
The changes to domicile law will affect investors in other ways, too. Currently, foreign nationals in the UK are not required to pay tax based on their foreign assets for their first five years living here. During this period of time, they are described as being ‘on remittance’.
Foreign nationals can choose to remain ‘on remittance’ after the initial five year period, but they are required to pay an annual fee to HMRC in order to do so. However, remittance can only continue until the individual has achieved domicile status – which, as mentioned, will now occur after living in the UK for 15 of the last 20 tax years, as opposed to the last 17 of 20. Again, this will affect foreign nationals living in the UK who are yet to become domicile, but could do so in the future.
So that pretty much sums up the government attacking the hand that feeds this London economy, and explains why foreign investors are investing elsewhere.
Sometimes, just sometimes I wonder if perhaps politicians are more interested in pursuing policies that they feel will win them votes rather than policies that they know are honest, sensible and for the benefit of the future. No point pursuing a policy that will have benefits in 4 years time, they want results that will get them voted in next time ... attacking the perception of the Fat Cat landlord is a good policy for getting votes from the limited thinking masses. No good for the future of the economy though.
My thoughts exactly. In fact, I am convinced that this is indeed the case - why would any politician do anything that would not ensure he/she retains his/her seat in the HofC?
A full in house prices to more sustaiable prices is welcome. Less buy to let and buy to let sell off is also welcome. With less buy to let and more residential ownership there will be greater transaction levels as residential owners sell more frequently.
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