House prices see pre-election boom

House prices see pre-election boom

Rising household incomes and consumer confidence has helped to lift the housing market, but trouble may come post-election, an economist has warned.

Nina Skero, economist for the Centre for Economics and Business Research (CEBR), said forecasts from the housing market analyst suggests that house prices could grow another 1.5 per cent in 2015, an upward revision from January, when CEBR had predicted a 0.6 per cent drop.

However, she said that a combination of overseas buyers holding back, and potential policy changes post-election, house prices in London could see a considerable slowdown.

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Ms Skero said London house prices would underperform the rest of the UK this year, following years of overperformance. Indeed, prices in the capital are expected to decline by 3.6 per cent this year.

The strength of sterling against the euro, fears of a mansion tax and hefty new stamp duty rates on high-value properties have all hit housing demand from overseas buyers.

She added: “In London, the decline will be driven by a significant weakening at the prime end of the market. A potential mansion tax [post-election], reduced overseas interest and hefty new stamp duty rates have hit demand for high-value property”.

Adviser view

Andrew Montlake, director of London-based mortgage broker Coreco, said: “The concern over the possible detail of the proposed mansion tax has undoubtedly contributed to a slowdown in the market at this level, as the uncertainty has led to a bit of a ‘wait and see’ approach from prospective buyers.

“The main issue with this is of course the fact that there are a fair number of people who are not rich, and certainly do not consider their homes as mansions, having bought them many years ago and seen the value rise dramatically.”