Property prices in central London are expected to fall by 5 per cent in 2017 according to property data firm Rightmove.
The situation across London as a whole however was mixed with a significant variations between market conditions in prime central London and peripheral areas. Outer London property prices are expected to see an approximate 3% increase in prices in 2017 Rightmove suggests with prices across England and Wales expected to rise by two per cent as a whole next year.
Brexit uncertainty continues to be a serious issue with respect to property price forecasting. As yet the government’s desired outcomes and the negotiating position it will adopt following the triggering of Article 50 to begin the two year countdown to leave the European Union remains unknown. Prime Minister Theresa May says she is committed to triggering the start of formal Brexit negotiations by the end of March next year and is expected to make announcements on the Government’s preferred future relationship with the EU in the New Year.
The disconnect between property prices in central London and the rest of the UK may be symptomatic of London’s traditional early reaction to changes in the British economy. During the 2007 global financial crisis and subsequent recession, prime London properties were the first affected by the downturn but were also the fastest to recover.
To date predicted negative economic data following the UK’s decision to leave the EU have failed to materialize. The British Chambers of Commerce revised up its forecast for economic growth next year but downgraded the outlook for 2018 due to inflation pressures and ongoing economic uncertainty about Britain’s future trading relationships with the EU. In terms of GDP forecasts, the Chambers revised upwards UK GDP growth forecast to 1.1% from 1% for 2017 after stronger-than-expected economic performance following the June Brexit vote.
London mayor, Sadiq Khan, has asked the London School of Economics to carry out a comprehensive inquiry into the impact of foreign investment on London’s housing market.
The inquiry which is expected to report back to the Mayor in the spring will investigate the dependence of property developers on foreign buyers and the number of properties kept empty.
Sadiq Khan is keen however to stress that the report is not intended to provide material which might be used to curtail the rights of overseas buyers in London. Announcing the study, the Mayor underlined the importance of foreign investment in London but also noted that further study was needed to understand the connection between London’s property affordability crisis and foreign investment. The Mayor added that many Londoners were concerned about the number of homes left empty and the link between empty properties and overseas investors.
The current study follows numerous reports that London is being used as a safe-haven for Russian Oligarchs, Chinese Princelings and Middle Eastern Sheikhs. Many properties in the capital are held by companies in offshore tax havens and many are unoccupied. Khan’s predecessor in City Hall, Boris Johnson, notably called for property developers to market new homes “first or equal first” to Londoners rather than to overseas buyers.
Last week the government tightened its Right to Rent rules, making it a criminal offence for a landlord to let to anyone they know, or have reasonable cause to believe, is an illegal immigrant. Previously breaches of this law were sanctioned by civil penalties. However as of 1st December the penalty for failing to check a tenant’s right to rent is a criminal offense which may risk a prison sentence.
Under the Rent to Right policy, landlords must check that their tenants can legally rent a property. Tenants must produce a document, such as a passport or a certificate of naturalisation, to prove their Right to Rent.Under the new rules, landlords could also receive government notices to terminate tenancies for people disqualified from renting. In such circumstances renters may face eviction without a court order.
This policy has serious ramifications for renters. According to a survey conducted by the housing charity Shelter, 44% of landlords said the policy would make them less likely to rent to people who appear to be immigrants, with similar numbers saying the same about people without a British passport.
In addition to potential discrimination , reports exist of letting agents charging prospective tenants additional agency fees to conduct Right to Rent checks.
In 2015 a Home Office evaluation of the Right to Rent scheme found that some landlords were charging a fee which ranged from £10 to £120 to carry out immigration checks which the government estimates would take around five minutes to complete. The Right to Rent policy must be applied to all tenants and by law, landlords must check that every tenant has the right to rent in the UK which could lead to increased lettings fees for tenants.
Although the Chancellor Philip Hammond’s Autumn Statement announced plans to ban lettings agent fees, there is an important window where landlords and letting agents can pass on the enhanced Right to Rent checks to tenants. Renters should therefore be vigilant that they check the amount charged by landlords for administration fees before the letting fee ban officially comes into force.