Following the landslide victory for Boris Johnson and the Conservatives, many eyes are focusing on what the Budget will bring to favour property. Post-election, there seemed to be a genuine sense that the country really did want to ‘get Brexit done’ and immediately after this announcement, the value of Sterling shot up to a 19 month high. This first quarter of 2020 has already begun to show signs of momentum in the London market. Finally we have a majority government, which removes a vast amount of uncertainty.
From our industry perspective, the pledge to increase Stamp Duty Land Tax (SDLT) for overseas buyers by a further 3% taking the top rate to 18%, would clearly be a negative for property in Prime Central London, for investors and for key workers looking to relocate to the UK, this could turn them against a move to the UK.
In the lettings sector the pledge to scrap Section 21 is also of concern, many landlords will not want the risk of potentially committing to indefinite lengths of tenancies, meaning that they might look to sell or leave their properties empty, this would mean a lack of rental stock and higher rents for tenants.
Prior to the election there was a real sense of pent up capital being held back, waiting to pounce when the timing is right. Since January, we have witnessed genuine buyers now coming to the fore ready to transact and get the deals done before prices rise, Sterling strengthens and the dreaded foreign buyer tax that has been mooted potentially becomes a reality.
Right now, we are having many conversations with buyers and sellers and what we have seen is international buyers in particular, using the currency play to their advantage and timing their investments accordingly.
London’s property market is always one debated amongst agents, vendors, landlords, tenants and buyers. For many months, the most frequently discussed topics circled around Brexit and Stamp Duty (SDLT). From an investment perspective, SDLT is an important factor on a buy-to-let investment purchase.
A £1,000,000 purchase can vary from £43,750 (single home) to £73,750 (two or more properties); clearly for someone who prefers or wants to invest in bricks and mortar rather than stocks, the associated costs would make one consider if it is worth it, based on the potential returns on investment from a yield perspective.
Central London BTL yields are sitting at close to 3% on average, whereas outside of the capital it is not uncommon to be able to achieve between 5%-9% yields, but the capital value can be a lot lower. Capital growth is accelerated in London due to the values and historic data which can show significant swings on the varying curves over time. Utilising the currency to your advantage, the yield then becomes favourable to an overseas buy-to-let investor.
So, whilst we are all eagerly watching the first 100 days leading up to Boris’ first budget it is equally fascinating to observe the first 100 days of 2020 in the London property market – exciting times ahead (at least in the short term).”
Written by Guy Bradshaw, director and head of London residential at Sotheby’s Realty UK