The rise and fall of the UK residential property market


It has been a busy past few months for the UK property market. As the economic recovery continues, property performance has been mixed with the countryside showing signs of outpacing some urban markets. Add to this the pressures of a new stamp duty land tax regime and the onset of the General Election and it’s been easy to see a moderating effect on the market as a whole.

Stamp Duty Land Tax (SDLT)

The reform of stamp duty by the Chancellor in December 2014 triggered a small frenzy of activity with buyers eager to exchange before the 4th December. A busy property marketplace was witnessed at the opening of 2015 however it remains the case that the full effect of the SDLT reform hasn’t become fully apparent. Initial analysis shows that the number of transactions have increased by 14% in the sub £1 million market (the sector benefiting most from the tax adjustment) launching that sector to consume 60.7% of the total market by the end of 2014.

It is unsurprising to see that the number of transactions between £2 million and £5 million have fallen by 15% since the same time last year whilst super-prime transactions over £10 million have fallen from 67 in 2013 to 52 in 2014.

The General Election and other factors

Whilst cunning buyers will see the uncertainty before an election as an opportunity to negotiate a favourable purchase from vendors who are motivated to sell, there is a certifiable mood of buyers and vendors alike sitting on their hands until after May.

It’s a well-documented fact that upcoming general elections will depress the market in all areas and as such it’s unsurprising that some residential research organisations have reported that prices were seen to decline in Prime Central London for the 4th month in a row at the end of February. The slowing market saw annual growth last year settle at 4.6% which represents the lowest rate in more than 5 years. The poor performance can largely be attributed to not only standard ‘election stagnation’, but also concerns over the prospect of further property taxation (specifically the ‘Mansion Tax’), and other factors such as interest rates, the introduction of capital gains tax for non-resident owners and a tightening of the environment surrounding mortgage regulation.

We currently see an unprecedented number of smaller political parties fighting for a share of the electorate and it is seen as more than just a possibility that the next government will be another coalition. Coalitions bring enough uncertainty, but beyond the fact that the Labour Party have declared setting ‘Mansion Tax’ at £3,000 per year on all properties between £2 million and £3 million, little can be deciphered with regards to how the tax may manifest itself.