Throughout 2015 the UK is expected to see capital value growth at a rate that is slower than initially expected. A report from Savills has shown that growth in all sectors was higher than expected in 2014 but there are a number of reasons why the growth could slow down during 2015.
Property markets in the UK are already shrouded with uncertainty as a result of the general election which is taking place in May, however, the effects experienced by the commercial and agricultural sectors are expected to remain low. For those people who have plans to invest in the residential property during 2015, they could be affected by the introduction of mansion tax as well as the addition of the Mortgage Market Review (MMR) which was introduced last year and this could result in a slow growth in capital value.
The growth in property prices within London is expected to be a lot more restrained this year and for the last 9 years London has outperformed the rest of the UK but affordability is likely to be more stretched as the rate of interest rises.
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The amount that lenders are going to offer to people is likely to decrease as a result of the MMR which will severely affect their ability of getting on the housing ladder, the report states. Lenders now have to assess each individual to see whether they can afford to pay back the amount that they are hoping to borrow and this is done through verifying their income. This could see demand in the private rented sector increase and it could create a platform on which the rental prices will grow.
There is likely to be a lower amount of activity in prime market properties as the election gets closer and the debate surrounding the mansion tax continues. The labour party have embraced the concept of the mansion tax which would result in all properties worth over £2 million being susceptible to a much higher rate of tax. Labour have claimed that if the mansion tax is implemented it will generate £1.2 billion per year.
Savills has predicted a continued growth this year in the agricultural market, but the report has warned that it will be vital for buyers and sellers to have an understanding of the local market conditions to ensure that their expectations are realistic. Economic growth is linked with agricultural incomes and if the improvement in the economy continues then the income of farms will also be affected. The availability of farm land is currently at historically low levels, and land size and use as well as diverse ownership will ensure that the value of growth continues to rise.
In 2015 there will be opportunities provided by the commercial sector, but there is likely to be a weakening in the capital values following the strong growth last year. Rental growth is likely to increase as there is a low amount of offices available in London and Savills predicts that international investors will continue to drive demand in the UK’s capital.