There are mixed feelings in the capital as we step further into 2020. Having left the EU and with a majority Conservative government, some are optimistic about what the next 12 months might bring, whilst others are decidedly pessimistic. If you’re looking to buy or sell a property in London this year, then you’ll want to know how its value is likely to change. Here’s our rundown of what’s in store for London house prices in 2020.
Brexit and property prices
The last few years have been plagued by uncertainty as the Brexit negotiations have bounced back and forth between London and Brussels. One effect of this has been that fewer are willing to invest in property, resulting in the flatlining of house prices.
Now that the deadlock has finally been broken, a significant amount of investment has been freed up and properties are beginning to change hands more freely. The latest statistics from Nationwide show that property price growth has increased year-on-year for December 2019 and January 2020. Prices are up 1.9% in January 2020 compared to 12 months before. December 2019 also saw the largest number of mortgages approved in five years.
This gentle ‘Boris bounce’, however, isn’t expected to last very long – the effects of leaving the EU, combined with particular policies from the Government, may put a halt to any significant growth in the capital’s housing market.
One of these policies regards Stamp Duty. In their 2019 manifesto, the Conservative Party pledged to introduce a new, higher rate of stamp duty for non-UK tax residents buying property in the UK. Such a move is intended to target the capital’s housing crisis – non-UK residents purchasing property solely for investment reasons has contributed to this. According to the Conservative party, as much as 13% of new builds were snapped up by foreign residents in 2014-2016, limiting the supply of liveable space for Londoners.
The hike in stamp duty for foreign buyers (a 3% premium) will undoubtedly reduce investment in London’s housing market from abroad, causing property prices to grow at a slower rate. In the meantime, however, this is expected to cause a temporary boost to prices as foreign investors rush to buy up property before higher tax charges come into force from April.
Another factor in how London’s property prices will fare in 2020 is the Bank of England’s base interest rate. On 30th January, the nation’s central bank announced that this rate would remain at 0.75%.
What does this mean for property prices? In a nutshell, the lower the Bank of England’s base rate, the less you’re likely to pay for a mortgage. Whilst many were expecting the base rate to be cut due to lower growth than forecasted, 0.75% is still one of the lowest rates on record. With cheaper mortgages on the market, more Londoners are likely to be on the hunt for their next home and property prices may see a moderate rise in response to healthy demand.
How a London property’s price will change over the coming year isn’t just influenced by wider market conditions. Where it’s located within the capital is also a factor. In the past five years, the average property in East London, for instance, has increased in value by 37%, according to an analysis by CRBE – compared to 9% across London as a whole.
This is down to a number of factors. Aside from East London being the city’s tech and creative hub, it’s also experiencing a surge in new developments to cater for the flocks of young professionals that want to live in a more fashionable part of the capital.
While the uncertainty of Brexit has now been cleared for a period, 2020 is unlikely to bring unbridled growth in London property prices. Whilst there’s no doubt that the resolution of the Brexit deadlock will have a positive impact on prices, other factors will keep that growth in check. Taken as a whole, values of London properties – though highly dependent on area – will most probably see a slight increase in prices during the next 12 months.