The big news for those in the property world is the banning of Letting Agent fees for tenants. These fees cover a wide range of services such as reference checking, inventory services and drawing up tenancy agreements amongst others. According to the Association of Residential Letting Agents (ARLA), this adds up to £202 that tenants will now save based on the average fees charged by their members. Despite being good news for tenants, many see this as another assault on Landlords and the private rental sector by the Government. Yet again Landlords will ultimately carry the burden as agencies pass on the cost. Of course, in high rent areas such as Southwest London these costs are negligible when compared with the rent, so it is not the end of the world. Although based on anecdotal reports from Scotland, where this is already law, it will result in a small increase in rental prices as Landlords in turn off-load their extra burden onto tenants.
The Government has been hitting Landlords hard with this being the latest in a volley of measures to reign in the expansion of the private rental sector and free up more affordable properties for first time buyers. It seems that this is an easy win for the Government, a crowd pleaser that will invariably excite more people than it will frustrate. Although it is a symptom of a much wider problem, a chronic shortfall in housing a.k.a. the Housing Crisis, which many believe can only truly be solved by a massive increase in the supply of new homes.
On that note, Philip Hammond also announced that he is going to pledge an additional £2.3bn in the form of an ‘infrastructure fund’ to help build an additional 100,000 new homes. He’s also suggesting a further £1.4bn will be spent building an additional 40,000 new affordable homes. However according to Shelter (a charity for the homeless) an extra 250,000 new homes need to be built each year just to keep up with demand. You don’t need to be a maths genius to work out that even with the extra money pledged today, the problem isn’t going away.
Cynically speaking though, it’s not hard to see why so many in the property world see this latest legislation as a short term measure to keep the people happy by bashing Landlords on the one hand and showing an investment on the other. All this whilst the Government attempts to get a handle on our burgeoning £1.6tn - that’s £25,000 per UK citizen - debt mountain.
The reduction in corporation tax from 20% to 17% will be a slight bonus for London property at the upper end. Many wealthy buyers are multiple business owners and the reduction in corporation tax will mean more cash available to them, while simultaneously ensuring that the UK remains a great place to do business.
The Office for Budget Responsibility OBR upgraded its forecast on growth for 2016 to 2.1% from 2%, however it has now forecast a reduced growth of 1.4% for 2017 from a previous prediction of 2.2%. This figure is of course going to give the City, and the press, something to chew on over Christmas, which will affect the property market as they contemplate the uncertainty of Brexit to come. Everyone is of course prepared for difficulty ahead and this downgraded forecast reflects those fears.
It seems that in terms of property in the capital it will no doubt be business as usual, which means a buyers' market forcing sellers to sit on the fence. So long as finance remains cheap it should be enough to keep prices steady as buyers and sellers are forced to compromise in equal measure. Indeed the Office of National Statistics (ONS) reported this month that house prices in the capital actually grew by 7.7% over the last year. The traditionally strong first quarter housing market should provide some clarity on how 2017 will unfold, but we forecast a more stable, if reluctant, market in sales. Watch this space.
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