Well, it wasn’t a particularly inspiring budget for property. Two measures made headlines – both ostensibly designed to help those struggling to board the housing train, writes Gary Murphy, partner and auctioneer for Allsop.
The price at which a property becomes liable for stamp duty was raised to £300,000 for first-time buyers. And the Help to Buy equity loan scheme received a £10bn injection. The private investor was offered little comfort.
So small stamp duty savings will be made but hardly enough to make a difference to first-time buying power. As for Help to Buy, could the government be feeding the beast that will eventually grow to devour values? It has long been argued that Help to Buy has only driven demand and exacerbated affordability.
The sustainability of prices (I hesitate to say values) must ultimately depend upon genuine affordability, supported by economic growth, job security and confidence in the future.
But affordability levels across the UK, as measured by the house price-to-earnings ratio, are undergoing a fundamental redistribution. In London prices are on average 14.5 times higher than annual earnings – more than ever before (source: Hometrack). Although the capital is registering price increases of 3%, this is largely driven by the suburbs. Many commentators expect London prices on average to remain static for a couple of years as prices adjust.
That said, there are still likely to be postcodes that move ahead of the rest. In 2017, Clapton, E5, stood out as the fastest-growing post code at 5%, closely followed by Stratford, Haringey, Islington and Stockwell.
Contrast this with the large regional cities. This year, we have seen the country’s biggest cities outside London outpace price growth in the capital. Manchester prices have risen by 7.9% and Birmingham by 7.3%. Here affordability levels are in line with the 15-year average.
While we have seen cautious but continued interest in London assets in the auction room, investors are waking up to the opportunity further afield. The promise of higher yields and greater capital growth has seen properties in the regions increasingly catch their eye. If growth remains robust and unemployment continues to fall, the regional cities could continue to be today’s smart buys.
Allsop is offering more than 250 lots on 14 December.
