Crown Mayfair property specialists… Optimism Amid Uncertainty

"Two dates in 2017 stand out for their significance to our industry and the wider UK economy - 29th March and 2nd November. The former is when Prime Minister Theresa May triggered Article 50 of the Lisbon Treaty formally signalling Britain's intention to leave the European Union and thus start the two-year process of departure. The latter is when Bank of England Governor Mark Carney announced a rise in interest rates of 25 basis points to 0.5% for the first time in 10 years.

Announcements in the Autumn Budget include plans to give local councils the authority to charge a 100% council tax levy on empty homes. The Chancellor also announced plans for a Review into the practice of land banking - whereby developers do not build on the land they own, even though they have acquired planning consent to do so. The Review will produce an interim report in time for the 2018 Spring Budget. This may lead to a realignment of values in unit-dense areas of development and a possible reduction of financial planning obligations whilst developers, forced to build prematurely, may seek greater financial viability testing of sites.

UK house prices have risen by 4.8% on average whereas properties in London have seen modest growth of 1.2% in the last 8 months (UBS House View - October 2017). Within certain postcodes of prime central London, we have observed a price decrease of 15%. This is partly as a result of changes to Stamp Duty for second homes and those valued in excess of one million. The outlook is however, more encouraging for prime London yields which have increased to an average of 3.2%.

The minority-Conservative government is pursuing a more interventionist role in aiming to address historic market failures that have resulted in a dearth of housing supply in the UK, which is most acutely felt in London. Stamp Duty for first time buyers purchasing properties up to £300,000 have been abolished, and first time buyers in London boroughs will also be exempt from Stamp Duty for the first £300,000 on properties worth up to £500,000. Capital Gains Tax will be extended to profits of non-UK residents on all UK property from April 2019. Profits gained from the disposal of a property which derives more than 75% of its value from UK land will also be liable to CGT. The introduction of the 30-day payment deadline for Capital Gains Tax will be deferred for all taxpayers until 2020, with the annual exemption increasing by £400 from April 2018. There were also announcements on changes to taxation rules for trusts held offshore by UK domiciled citizens, which will apply retrospectively from 6th April 2017. These rules extend to inheritance tax for individuals not domiciled in the UK but who have interests in companies which have a stake in UK residential property. As of April 2020, non-UK resident landlords will be subject to corporation tax as opposed to income tax on their rental profits. The UK government has also launched a consultation on taxing the profits of non-domiciled citizens on immovable property with the intention of bringing the new rules into force from April 2019.

As a result of the recent changes to U.K.’s economic and political climate, Crown Mayfair has received increased interest from parties broadening their focus to include commercial acquisitions. The depreciation of sterling has also maintained buyers wanting to invest within the Prime Markets. We have noted an increase in clientele purchasing residential homes with budgets in excess of £20 million, attributed by the strength of the dollar versus sterling and softer market conditions. Furthermore, following on from the Chancellor's recent announcement for further devolution to Greater Manchester, we have undertaken feasibility studies in the North of England for clients exploring different areas for higher yields and capitalisation.

The UK remains an attractive location for investors looking for a stronghold investment. As ever, we will continue to monitor the regulatory landscape."

Crown Mayfair are property experts and specialists based in London and report annually on the state of the market.