By Trevor Abrahmsohn, Glentree International

The year 2025 has started early in the residential market, as agents and analysts take out their calculators and peruse the figures of the last ‘interesting’ quarter. It’s a pick-and-mix selection of pluses and minuses — the main influence of course, is mortgage rates. These have become slightly more attractive as inflation has tumbled from over 11% to under 2%. This will be a mild stimulant to the residential property market in the lower- to medium-price sectors. The RICS foresee that the “…interest rate cut by the Bank of England may or may not be followed by further reductions over the coming months, but the direction of travel has now shifted, and this will help support economic activity through the back end of this year and into 2025.”1

Conversely, the RICS Construction Monitor identifies “…financial constraints as the key impediment to activity demonstrating the significance of this signal for the building industry. Alongside this, forward-looking indicators point to a likely modest uplift in activity in the residential sector…”.2

The supply of new property coming onto the market is still constrained and this is matched by fewer buyers (particularly the unencumbered ones) who are looking to purchase, at any one time.

London, Bellwether of The Country

London is always the bellwether of the country. Rightmove, the augur of all property data, states that properties in London had an overall average price of £687,017 over the last year with sold prices in London down 5% on the previous year and 2% up on the 2021 peak of £671,142, demonstrating that the marketplace is becalmed rather than buzzing with activity.3

Two years ago, a property in the £1.5—2million price range through Glentree would have received 40 appointments to view which would have resulted in at least five offers. We would then organise an informal competitive tender to decide the winning bid, in-order to prevent gazumping, which now seems to be a word relegated to antiquity.

Trevor Abrahmsohn

Now the time taken to sell this type of property has increased from eight weeks to several months. At the moment, viewings have reduced to around 10 to 12 and from this, we would hope to achieve one bid for the property — two if we were very lucky.

The most obvious reason is a Budget that imposed punitive measures on the NIC (National Insurance Contribution), which will only depress wages and act as a drag on employment. Many analysts feel that inflation and mortgage costs may be greater than would be otherwise. This is on top of a high cost of living, the most glaring example being that UK citizens are burdened with the costliest prices in the world for electricity, which pushes up the price of everything else.4

The result will be overall feeble growth in this price range of between 1—3% during the course of 2025.

There could be some accelerated purchases for second property owners over the next few months to bypass the surcharge in Stamp Duty that will be imposed in the New Year, but this will be a temporary phenomenon.

Property Could Languish

Mortgages will diminish in the middle-range price sector as those buyers’ grapple with the increased cost of living. In my view, supply and demand will be in equilibrium, but very price sensitive.

In the higher price ranges, where the international buyers become more and more significant as the value range rises, they could ease by 10%, especially in cases where the sellers are anxious to accelerate the disposal.

Non-dom’s Not Welcome

The main reason for this is the change to Non-dom fiscal arrangements imposed by the Chancellor. This wealthy contingent is highly mobile and there are many other countries on the Continent who are grateful for their presence. If we don’t want them, the likes of Portugal and Italy, etc. are changing their fiscal laws to accommodate them and their influx of currency. It would have been more profitable to levy a charge of £150—£200,000 per annum on these individuals so that they remain in this country, employ people, take risks and spend their money, whilst keeping their worldwide assets free from UK IHT (Inheritance Tax).

These high-net worth individuals are an asset to the country, for their financial largesse as well as their entrepreneurial spirit. They start businesses which employ others, they invest in property, and educate their children in British schools. The ‘multiplier effect’ of their spending adds significantly to an economy which is trying to cope with a volatile global situation and a domestic tax burden. Thankfully, the pre-Budget fears of a Mansion Tax and Capital Gains Tax (which we all anticipated would be at parity with Income Tax) did not materialise.

Property Is in For the Long Game

My advice is that if you’re in stable employment, you should take out as large a mortgage as you can afford. Your home is more than a sanctuary for your family. It may also provide a quasi-pension for the future and if you downsize, it could release some welcome cash to provide your children with a ‘leg up’ on the housing ladder. No matter how we ride the volatile economic peaks and troughs, this will always be the case.

Landlords an Endangered Species

Fiscal changes, the higher cost of borrowing and looming threat of rent ‘reforms’ have all conspired to make the once-ubiqiutous buy-to-let landlord an endangered species. Once upon a time, these amateur investors were part of the ‘property-owning democracy’. Now, they’re rapidly offloading their investments before the illiquid assets become an albatross round their neck. The result is a steep increase in rent prices which according to Hamptons, are…”expected to outpace the rate of inflation, with increases of 4.5% in 2025 and 4% in 2026 and 2027.”5

Between now and the end of 2027, Hamptons predict that rents will rise by 17% across Great Britain, outpacing house price growth of 12.5%.6

At the peak of the rental market, there will always be those who can afford a salubrious dwelling, to rent. The Non-dom Tax changes mean that purchasers of trophy property are deciding to sequester their huge wealth abroad, out of the clutches of the Chancellor. By renting, they avoid the penalties of Stamp Duty and any property maintenance charges, which are borne by the landlord.

Over the last two years Glentree has had enquiries from affluent tenants who have the wherewithal to spend up to £50,000 per week, although this has dwindled recently. What goes down must invariably rise though, and thanks to our global reach, we’re able to tap into a rich supply of rental applicants from China and Hong Kong. These elite tenants are successful, entrepreneurial and have a great deal of money to pour into a substantial property in the prime des res areas of the capital, such as St Johns Wood, Hampstead, and Kenwood.

Via @PropertyWire