An atmosphere of political and market uncertainty could threaten the rapid rebound of UK residential real estate, which also took a hit recently with news of an impending capital gains tax hike. Having quickly regained some of the lost ground, price growth now is expected to taper off as the market heads into a period of stability and sustained recovery. See the following article from Property Wire for more on this.
While average UK house prices have proved resilient so far in 2010 with levels currently 13.6% higher than the trough in the market in the first three months of 2009, there are signs of price growth slowing, according analysts. The latest forecast from consultants Jones Lang LaSalle expects the annual rate of growth to fade during the remainder of 2010, ending down 1% across the UK and flat in the London market by the end of the year.
‘The recovery in UK house prices, which started during late 2009 with great momentum, surprised the market. Prices are now only 9.8% lower than peak values witnessed towards the end 2007. However, this recovery is now at risk as the political environment remains in a state of flux,’ said James Thomas, Head of Residential Investment and Development at Jones Lang LaSalle.
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‘The impact of structural changes to the national economy, aimed at curbing the national debt, has left buyers and sellers unsure of the right time to act. London and the South are likely to fare better and outperform the wider UK market as a result of global investment capitalizing on the continued weakness of sterling but the new government’s emergency budget in June will have a significant bearing on existing stability,’ he explained.
The UK Residential Market Forecast report highlights the effects the result of the general election will have on the housing market. The plans to overhaul capital gains tax from 18% to at least 40% on non business assets, such as second homes and buy to let property and the eradication of the Home Information Packs, which is likely to increase housing supply in the short term both present downside pressures on pricing, it suggests.
But analysts expect 2011 to be stable. ‘Looking beyond 2010 we can expect 2011 to show signs of market stabilization, allowing time for the economic recovery to be fully embedded by 2012,’ said Rob Bruce, Head of Residential Research.
‘The outlook for the housing market remains strong over the medium to long term. Demand, activity and pricing will build through 2012 to 2014 encouraged by further lender and developer participation. By 2013 we can expect house price inflation to accelerate towards double digits, partly fueled by the structural undersupply of new housing in the UK,’ he added.
This article has been republished from Property Wire. You can also view this article at Property Wire, an international real estate news site.