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Central London property prices set to rise 18% in next five years

Central London property prices set to rise 18% in next five years and rents by 19.5% as market moves forward after the UK’s general election, it is claimed.

The latest analysis says that unprecedented uncertainty surrounding last month’s election saw a stifling of house price growth across London, with the rate of house price growth at less than 4%, compared to the 9.6% increase seen in 2014.

The majority win by the conservatives has eased the fear of mansion taxes and potential capped rents. London is not to bear the brunt of these negative tax changes. However both issues have now subsided, following the surprise majority win by the Conservatives, according to international real estate consultants Cluttons.

Pre election worries saw domestic and international buyers’ confidence reflected in a sharp tailing off in demand during the first quarter of 2015. Behavioral trends saw vendors withdrawing properties and buyers adopting a wait and see approach. However, this is not the case with the exit strategy of our London Property Bond which has sold 3 off plan luxury penthouse apartments in fashionable St Johns Wood. As such it provides an excellent example of a strong niche market breaking the barriers in central London property.

‘There is no doubt that the results of the general election have helped to re-inject confidence into the market that had receded early on this year,’ said Cluttons’ international research and business development manager, Faisal Durrani.

‘The outlook for the London housing market has stabilised, while buyers and vendors have returned to the market following a conspicuous absence of activity. Our outlook for the rest of the year is for increased stability in the market and a return to a more normal state of activity,’ he added.

The report also says that despite the Mortgage Market Review (MMR) contributing to a 16% year on year dip in home purchase loans in greater London to March 2015, affordability appears to be improving slightly, with the average loan size dipping to 3.86 times annual income in the first quarter of 2015.

Cluttons forecasts modest central London house price growth in 2015 of between 2% and 3%, before accelerating to nearly 5% in 2016 and stabilising at around 4% per annum between 2017 and 2019. Cluttons expect this level of growth to deliver cumulative capital value appreciation of almost 18% over the next five years.

The prospects for the prime central London rental market are stable, with average growth of 4% per annum forecast for the next five years. ‘The key driver of course for this behaviour is the desire to purchase.

For investors seeking a strong market to invest into, our London Property Bond represents a sensible option with strong forecasts for the years ahead. A 5 year bond with a fixed return of 8% per annum paid every 6 months.

 

Pension Tax Relief

Pension tax relief changes could hit high Earners

Pension tax relief changes could come as soon as next month’s emergency budget and could possible affect the UK’s top earners. Wealth managers are advising they should act soon. As part of their election manifesto the Tories pledged to reduce tax relief on pension contributions for those earning over £150,000.

Currently, individuals can contribute up to £40,000 to their pension while claiming full tax relief – but the Conservatives said they’d gradually reduce this figure down to as little as £10,000 for high earners.

Additional rate taxpayers could lose as much as £13,500 this year if they don’t act quickly to take advantage of the existing pension rules while they are still available. A viable strategy and sensible approach for some additional rate taxpayers would be to contribute the maximum amount into a pension before the budget. This would allow and contributions to achieve the full tax relief.

While the timing of any change is not known – there is a possibility they could be introduced as early as the Budget or delayed until April 2016. Time to rethink your pension strategy?