1. Prices will soften or continue to rise slowly
Mark Lawrinson, Regional Sales Director of Portico London estate agents, states “Buyer affordability was stretched to the limits in 2016. Currently, the average house price in London is the highest it has ever been at £580,600 – and prices simply can’t continue to increase at this rate. Sales transactions in London also dropped dramatically since the Stamp Duty changes came into effect in April last year, now down 60% in prime central London versus last year.
The combination of Brexit, blown up prices and falling volumes mean that price growth is most likely expected to slow this year, with prices in prime central London and the most expensive boroughs likely to soften.”
2. Biggest house price rises will be in Zone 3 outwards
Mark Lawrinson also advises; “Though we believe that prices will soften in prime central London, we still expect certain hotspots to experience price growth – though perhaps not at the level we’ve seen in previous years.
If it’s an investment you’re after, it’s crucial you buy in areas that are undergoing gentrification or experiencing infrastructure investment, that offer healthy yields so mortgage repayments aren’t a problem.
Areas in the outer Zones are likely to experience the best price growth this year. Zone 5’s East Croydon is becoming the capital’s next big property hotspot. It’s currently undergoing huge development, offers key train links and the Gatwick Express, Westfield Shopping centre will soon be arriving, plus it offers a mix of luxury and affordable living ideal for young professionals.
Crossrail winner Forest Gate is also likely to experience further gentrification when the high-speed rail link arrives this year, which will keep house prices on their upward climb. Leyton is another east London pocket tipped for house price growth, and in fact, east London as a whole will be one of the best investment areas generally this year down to improving transport links and the fact that prices here are still “affordable” compared with the rest of the capital.”
3. Valuation rush expected
George Osborne unveiled a shock tax change in 2015: the tax relief that landlords get for finance costs will be restricted to the basic rate of Income Tax. This tax change will be phased in from 6th April this year and fully implemented by 2020.
There is no doubt these changes will makes things more difficult for landlords, but the first thing to note is that landlords who are basic rate tax payers (earning less than about £40k), or those without a mortgage, won’t be affected at all.
Secondly, there are steps landlords can take to try and cut their interest costs. The main method is re-mortgaging. Buy-to-let mortgage interest rates have fallen significantly in recent years, so deals currently on the market may well be substantially better than on products arranged a few years ago.
With large increases in property prices in London, another tip is to get your rental property re-valued. This will make your lender recalculate your Loan To Value, and a lower LTV means a better interest rate and a larger choice of lenders.”