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Moving on

16.12.19

Buyers and sellers are expected to emerge from the British woodwork as Boris Johnson’s re-election as prime minister creates a path of certainty for the U.K.’s housing market, according to experts in the country’s real estate sector.

“We finally have a sense of certainty on which we can move forward as a nation,” Marc von Grundherr, director of estate agency Benham and Reeves, said in a statement. “While the curtain is far from falling on the rollercoaster that has been our European departure, we should see a fair degree of positive property market stimulation as we enter into next year.”

Experts anticipate that with the Conservative Party firmly in power, the Brexit deadline on Jan. 31 will be met, easing the political handwringing that has blighted the market since the referendum in 2016, when the country voted to leave the European Union.

“We know that across the mainstream market, political and economic uncertainty have held back market demand and supply being brought to the market,” according to Lucian Cook, head of U.K. residential research at estate agency Savills.

Across Savills’ prime markets, demand has been building and deals have been put on hold pending some political clarity, he said.

The election result “should unlock some of these deals and mean prospective buyers are more committed, bringing a greater sense of urgency to the market. However, there is a possibility that it will also harden some sellers’ price expectations,” Mr. Cook commented.

While some sellers will expect a surge in the value of their homes, a rush of supply is in fact likely to send asking prices lower, according to Liam Bailey, global head of research at Knight Frank.

As the market re-prices, the gap between buyer and seller price expectations will determine how quickly transactions occur, he said.

In prime central London, an area which has witnessed significant price decreases, the Conservative party win “has ended half a decade of deadlock,” said Becky Fatemi, managing director of estate agency Rokstone.

A combination of the “stamp duty hike [2014] and Brexit anxiety has caused price falls of up to 30% since the peak of the market in 2014. But this Christmas election has given the gift of certainty,” she said.

As is the case across the rest of the market, in prime central London “sellers will now be more reluctant to accept low offers from already reduced prices. There is a small window to buy what has been on the market at a discounted price,” Ms. Fatemi said.

Since the election results, the pound strengthened against the dollar from $1.30 before the vote to above $1.35 at one point Friday, its highest level since May 2018, according to the BBC.

Sterling's value is expected to strengthen even further as uncertainty continues to dissipate and the biggest impact is expected after Brexit trade deals are negotiated.

“This upwards trajectory could begin to encourage overseas buyers into the market before any further erosion of their buying power,” Mr. Bailey said.

International buyers will also be aware of the Conservative Party proposal to bring in a 3% stamp duty increase for non-resident buyers.

A deluge of sales ahead of any stamp duty change is expected according to Camilla Dell, managing partner of buying agency Black Brick, who has already seen a rush to transact. “We exchanged on two deals both by overseas buyers, before the election result was known in anticipation the Conservatives would win,” she said.

Along with a 3% tax increase for foreign buyers, Mr. Johnson has floated the idea of lowering the rates of stamp duty on homes sold for over £1.5 million, as well as abolishing the tax on homes sold for less than £500,000.

He has also promised to deliver Brexit and within the first 100 days of leadership to launch a review of defense, security and foreign policy; legislate for a funding increase to schools; and change the law to increase the amount that migrants pay to use the National Health Service (NHS).

Though Brexit looks set to be a certainty in January in the hands of the Conservatives, and the certitude is good news from a real estate perspective, its long-term effects have yet to be seen and negotiations are expected to take at least another year.

https://www.mansionglobal.com/articles

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