A Mixed Bag For Property

This has been an interesting year for residential property. While certain value ranges have experienced reasonable activity, others have been dormant.

The reality is that Brexit has not had the cataclysmic effect on sentiments that was presumed and predicted. The main influence has been on mortgage interest rates; these have been reasonably stable to date and by the look of things, will continue in this vein. That is, of course, apart from any tweaks that Mr. Carney, Governor of the Bank of England, may be forced to impose during 2019 if inflation continues to rise.

Since we are nearing full employment, the spectre of unemployment is irrelevant and has paltry influence on sentiments.

More recently, in the last quarter of 2018, activity has generally slowed as the Brexit issue reaches a crescendo.

With Retail sales for November being the lowest for 10 years, residential property sales down and the UK growth under pressure, is it any wonder that the intrinsic link between these, which I have been banging on for years, is indivisible.

‘Stingers’ rather than ‘sleeping policemen’

This is the legacy of reflux from the former chancellor Osborne’ s reign, which the daft Stamp Duty changes have burdened us with. Slowing the housing market from a frenzy is no bad thing, but using ‘stingers’ rather than ‘sleeping policemen’ is just plain stupid.

Our economy has lost the stimulus from Quantitative Easing and cheap money and should now have been able to rely on the housing market for some cheer, but even this has ebbed away and what an inauspicious moment, in the post Brexit era.

In order to make sensible predictions for the Residential Property Market in 2019, it needs to be broken down into three reasonably self-contained sectors, since grouping these together could be misleading.

Property up to £1million

My view is that the market up to £1million will continue reasonably well. It is bolstered, if not saved, by the assistance of the government’s Help-to-Buy scheme and is showing acceptable levels of liquidity. I don’t envisage that property prices will grow much, since supply and demand are reasonably in balance. The exception, in particular, are areas East of the River Thames and Nine Elms where there is a stock overhang and prices could fall further.

Between £1-3million

There are still acceptable levels of sales in the £1–3million market, providing that asking prices are quite close to values. Unfortunately, long chains of buyers and sellers together with the labyrinthine process of mortgage applications means that activity is more sluggish than it should be.

We are finding that the gestation time for the marketing of any particular property in this range is probably 12 weeks, which is still substantially down from a much longer period last year. Again, I don’t anticipate a huge amount of growth in this sector, although at the same time, prices should not depreciate.

Between £5-10million

The most problematic sector is the market in excess of £5–10million, which is 50% or more dependent on foreign nationals. Issues such as Brexit, mortgage interest rates, etc. hold little interest to buyers in this category – they are more concerned about the Sterling exchange rate and the state of the UK and USA capital markets.

Paradoxically, the political machinations of the present Tory government and its attempts to grapple with the Brexit problem, bring an unexpected bonus. As the political turmoil rumbles on, the value of the Pound against the basket of foreign currencies diminishes further, which presents an attractive opportunity for buyers from abroad in this sector.

Stamp Duty and fiscal changes to foreign ownership of UK property have had a substantial drag on values and activity, evidenced by the fact that these are down by at least 25% and 50% respectively.

Clearly, there is a stock overhang, with a significant amount of properties languishing on the market for many years. This will depress underlying values in the beginning of 2019 until they have been reabsorbed by sales.

A prospective vendor who doesn’t discipline themselves by imposing a keen asking price for their property, will be punished by complete inertia with few offers. Until the excess supply has been mopped up, I suspect that there will be further deterioration of values at this end of the market.


As for the rental market, activity up to £1,000 per week has been reasonably orderly and I expect this to continue into 2019. With Buy-to-Let landlords now selling some of their investments, due to the less attractive tax changes relating to mortgage payments, there may be a slight increase in supply, but I think this will be soaked up by demand.

The sector between £1,000 and £2,000 per week has been very slow of late and although there is very little supply, demand is even less than this and properties are remaining on the market for longer than usual.

The incidental benefit of the Stamp Duty changes is the emergence of the uber-tenant, some of whom were former purchasers, since they have cottoned-on that the cost of purchasing for a stay of five years, is 20% of the capital sum (Stamp Duty + Agents/solicitors fees), and they can have five years rent-free, instead.

This has resulted in deals that we have done of up to £30,000 per week and nursing another of circa, £50,000 per week, which hitherto for us, has been unheard of.

Mansions that have been languishing on the market for sale are now being snapped-up by moguls from industry, media and finance from many far-flung places in the world, and the owners are now only too happy to take their money.

The Treasury loose their Stamp Duty, but as the famous American economist, Arthur Laffer, would have said, “If governments are foolish enough to impose a transaction tax that people find is unreasonable, they will find a way to circumnavigate it.” Don’t forget, Stamp Duty is perfectly collectable, but at the same time, perfectly avoidable.

I don’t see much growth in all of these sectors. If there is a Brexit resolution in the forthcoming months, I am sure that this will unleash a number of would-be tenants, which will help with demand. The converse is the case, if this vexed matter becomes even more convoluted.


If there is consensus on a Brexit deal and it successfully passes through the Commons (presumably in the early part of the New Year), I see that this whole vexed issue will disappear from consumer consciousness as the matter moves on to the less emotive trading agreement. There is a reasonable chance that this will happen; if so, positive sentiments could return quite quickly, when the Brexit matter is relegated from front page to lineage.

In the alternative, if there is no commons approval on a Brexit agreement, a no deal Brexit or, worst still, a second referendum is planned, then I fear the great art of ‘wall sitting’ will be the order of the day, until sanity has returned to these issues, in one form or another.

The inverted bond yield curve points toward a possible US recession in the next 18 months, which is not conducive to optimism in the capital markets. It could very well bring on the fear that the UK economy will ‘catch a cold’ at a particularly vulnerable time for the UK.

The Corbyn factor

Finally, as we wade through the many obstacles which have presented themselves recently, there is the ‘Corbyn factor’, which invokes terror in anyone who can read and breathe. It will act as a wrecking ball to all sectors over £1million, let alone the general economy. The flight of capital from the UK will be palpable as the upper middle class wealth creators, make a quick exit from the country and what a real shame that would be.

However, since a General Election is three years away, this issue should only raise concern a year before the vote.

In the words of infamously stalwart Labour peer, Lord Sugar, “If a Corbyn-led government is returned at the next General Election, I’m out of here”. I think a lot of others will be joining him, including myself and this is saying something coming from a proud and unabashed anglophile.