By Tal Orly, CEO of Cogress – a private equity group for property
2017 was an eventful year for the London property market. When attempting to determine the key focus points for the industry in 2018, it is worth reviewing the important events and government policies introduced last year, in order to best gauge how the market will continue to develop in the months to come.
Firstly, London property prices fell 1.8% across the board . Any form of optimism that began to creep back into the market was marred by the continued political and economic uncertainty surrounding Brexit. This trend looks set to continue in the short term, with industry heavyweights and data agencies expecting falls of between 1% – 2% in 2018 for London. The silver lining though is that our analysts here at Cogress expect these falls to be location specific. While there is evidence that Prime and Central London will continue to struggle, opportunities are likely to present themselves in areas further afield, both within and outside the London commuter belt.
A key development in 2017 was the government’s continued push for affordable housing options, seeing stamp duty abolitions offered for first time buyers. This was a full exemption for any property under £300,000 and a further exemption on the first £300,000 of any property up to the value of £500,000.
New home building in 2017 also increased, with a total of 184,000 new homes coming to market in England . Whilst this is still below the 2007 / 2008 pre-recession figures of 200,000, the growth in this number remains a positive sign and indicates housebuilders will continue to answer the government’s call and provide more housing options in 2018.
Policy changes have also changed the landscape of the property market, introducing a complete overhaul in the way landlords are taxed on their buy to let investments. This policy revamp reduced their ability to claim relief on their mortgage interest payments at the marginal rate of tax (potentially 45%). This will now move to 20%, with the changes set to be phased in completely by April 2020 . Add to this the changes which have toughened lending criteria and the proposed abolishment of letting fees, the outlook for private landlords in 2018 is particularly bleak.
It has become increasingly apparent that the overarching goal of new government policies introduced last year is to increase housing supply for Londoners, creating more affordable housing options in the process. The government has made affordability of first homes front and centre of their political campaigning, with the intention to create opportunities for first-time-buyers where there weren’t any before. The likely rent relief from buy to let changes, funding options from Help to Buy schemes and money saved on stamp duty relief will undoubtedly leave first home buyers in a better position to take their first steps onto the property ladder this year .
However, with any wave of change, there are always at least two differing perspectives and this is no exception . Property critics have argued that the government focused funding will do little more than push up prices of entry level housing, an obvious counter to the very aims of these initiatives.
Nevertheless, here at Cogress we believe that developments that are intended to deliver to this low-cost market are key investment opportunities for 2018 and beyond. Investors should adapt to the demand of the buyer, and such projects that encompass lower capital values with lower £ per square foot rates in up and coming commuter belt areas are going to sell. From either way you look at it, either with the perspective of an investor or a developer; provided you can get a site that is going to meet the criteria and you are able to get it for the right price, it can only be a positive thing.
So, the next challenge is identifying these new locations that are set to be the future property hotspots in the months and years to come. It is never easy pinpointing exact areas set to benefit in the next twelve months, however, what we are able to do at Cogress is assess the underlying criteria and measure it against location specific drivers. This allows us to make the best-informed predictions for our 6000-strong investor base and futureproof the property industry as a result. Our research shows zones east of London are set to be a hotbed of activity and house price growth in 2018 and it will therefore be a focus area for Cogress in the months to come.
2018 is shaping up to be an exciting year for the property market, and keeping up to date with market trends is more important than ever with Brexit quickly approaching. Whilst not giving away all of our secrets, the above should give some insight into what we believe will form the key investment opportunities in 2018.
*Past performance is no guarantee of future results. Your capital is at risk.
(@Cogressltd & @Tal_OrlyCEO)
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Full Fact, ‘House building in England’, Full Fact, 16 November 2017, [Online]. Available at: https://fullfact.org/economy/house-building-england/ (Accessed: 19 January 2018)
Help to Buy, ‘Help to Buy is here to help’, HM Government, [Online]. Available at: https://www.helptobuy.gov.uk/equity-loan/eligibility/ (Accessed 19 January 2018)
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Cahill, H. ‘Stamp duty cut for first-time buyers having minimal impact on market, says property expert’, City A.M., 18 January 2018, [Online]. Available at: http://www.cityam.com/278972/stamp-duty-cut-first-time-buyers-having-minimal-impact (Accessed: 19 January 2018)