July 10, 2017
Price rises, leasehold bans and backing for Crossrail 2
After a tumultuous few months in the political world, everything calmed down a bit in July. Brexit negotiations are now fully underway – albeit moving, as you would expect, at a fairly slow pace – while the summer recess at Westminster means everyone can take a breather from the gossip, speculation and conjecture swirling around Theresa May and a possible leadership bid against her.
For now, her minority government – propped up by the DUP – is holding onto power, with very little desire for another bruising election campaign at present. With politics taking more of a backseat – sort of – property has been making headlines and filling up more column inches. Here, we take a look at the main stories affecting the London property market in the last month.
Sales on the up
The June Housing Report from NAEA Propertmark has revealed that house sales were on the up last month, with buyers and sellers eager to push through transactions before the quieter summer months (when everyone jets off on holiday) arrived. Demand for homes also increased by 10% in June, rising from 350 house hunters per registered branch to 384. This also reflects a 16% increase in demand from the same month last year.
Supply, meanwhile, fell in June, with the number of properties available per branch dropping from 40 to 37. Demand is still comfortably outstripping supply, which is good news for sellers wanting to up their asking prices but not such good news for frustrated buyers.
First-time buyers, however, are having a slightly easier time of it, with sales to this demographic increasing in June. The proportion of homes sold to first-time buyers reached 30%, the highest level since January this year. After the uncertainty caused by the election – which wasn’t anywhere near as intense as the uncertainty surrounding last year’s referendum – the property market has bounced back and buyers and sellers haven’t been deterred from taking decisive steps.
The latest house price index from Rightmove also paints a positive picture for sellers. While prices only went up by 0.1% between June and July, they are up by 2.8% since last July. What’s more, between May and June prices dropped by 0.4%, while between June and July last year – shortly after the EU referendum result was revealed – prices dropped by 0.9%. Growth is now back, albeit minimally so, and house prices continue to rise substantially year on year. The average asking price in the UK is now more than £316,000, according to Rightmove.
In London, house prices grew by 1.1% between June and July and have experienced an uplift of 0.9% in the last 12 months. Promisingly, the house price index also revealed that there were 4.6% more sales agreed in June 2017 than there were in June 2016, suggesting that the property market has now fully recovered from the shock of Brexit. In addition, 7.6% more properties were brought to market by sellers confident of conditions and their chances of selling.
A ban on leasehold houses
The government recently set out plans to outlaw leaseholds on new-build homes, with new measures designed to crackdown on “unfair charges” levied on buyers. Under the proposals, which are subject to an eight week public consultation, ground rents could also be dramatically reduced.
The move has been welcomed by campaigners who have spent years calling for an end to leaseholds on houses, but some have argued more needs to be done for existing leaseholders who are facing spiralling ground rents.
Sajid Javid, Communities Secretary, said in a speech: “Enough is enough. These practices are unjust, unnecessary and need to stop.”
In some cases, ground rents are being doubled every decade by freeholders, which is leaving homeowners in financial bother and making homes increasingly difficult – or even impossible – to sell.
While many flats and apartments – especially those found in blocks – are leaseholds, houses are typically freehold. However, in recent years there has been a growing trend for leasehold houses, particularly when it comes to new-build properties. A freeholder owns the property and the land it is built on outright, whereas leaseholders own their homes for a fixed period of time – effectively leasing it from a freeholder or landlord. The person owns the home for the length of the lease agreement with the freeholder, but ownership returns to the freeholder when the lease expires. Leaseholders also have to pay ground rent and other fees – including service charges and admin costs – to make changes to their home and for maintenance purposes.
There are 1.2 million leasehold houses in England, with this type of home particularly prominent in the North West. Around 21% of all private property in England is owned by leaseholders, with 30% of these leasehold houses.
Stories have emerged of homeowners paying very large ground rents or being billed £1,500 to make a small change to their family home, while others who have tried to buy the freehold have been met with high asking prices.
With MPs calling the situation a “national scandal” and comparing it to PPI in the finance industry, the government is determined to take action to protect leaseholders from increasingly “onerous charges”.
Support for Crossrail 2
The government has also been talking up further transport infrastructure in London, with Transport Secretary Chris Grayling declaring his backing for Crossrail 2. Crossrail, or the Elizabeth Line to give it its official moniker, won’t be fully operational until December 2019, but plans are already in place for its sister version. While Crossrail runs from Reading in the west to Shenfield in the east, slashing journey times from commuter towns to the capital, Crossrail 2 is a commuter rail line that will run north-south across the capital.
There had been fears that the plans would be shelved, with mounting pressure for the government to act elsewhere to improve transport infrastructure across the country, but Grayling’s support for Crossrail 2 – along with calls for a fresh public consultation – suggests a different approach. The news was met with relief by London mayor Sadiq Khan, who insists the line is “essential for future prosperity”.
Crossrail 2, which would link Hertfordshire and Surrey via a number of Central London locations, including Tottenham Hale, Euston-St Pancras, Tottenham Court Road, Victoria and Clapham Junction, could be running as soon as 2033 if the green light is given for the scheme. Expected to cost around £30bn, construction could start in the early 2020s, but there is significant opposition from those who think Crossrail 2 is another transport project that merely benefits London and the South East. With electrification projects cancelled or put on hold indefinitely in the North of England and Wales, Grayling’s support for Crossrail 2 has drawn some vocal criticism, not least from Greater Manchester mayor Andy Burnham.
“I am a supporter of Crossrail 2, but given its price tag we have to ensure that we get this right,” Grayling said. “The mayor and I have agreed to work together on it over the coming months to develop plans that are as strong as possible, so that the public gets an affordable scheme that is fair to the UK taxpayer.”
From our point of view, this new infrastructure would be a boon to sellers in the parts of London we operate in. Hackney Central and Balham both feature on the proposed Crossrail 2 route map and even better transport links would make these already desirable areas – especially among young professionals – even more desirable.
That’s that for July. We’ll be back again in August to keep you abreast of the latest property news.
For more help and advice on buying or selling a home in London, please get in touch with Atkinson McLeod.
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