A combination of political risks plus changes to tax and money laundering rules means the UK property market is about to enter a structural downturn, Henry Pryor, a property agent, has warned.
Commenting on the prospects for the London housing market, property buying agent Mr Pryor said: "As someone who buys property for a living, I think I will have the market to myself at the end of this year. I have worked through three of these downturns."
He said whether people are justified in fearing the impact of the UK formally leaving the UK in March 2019 or not, he can't see why someone would buy a house in the last quarter of this year or the first quarter of next year.
Mr Pryor, who worked for Savills for 10 years and then went on to run the country house department in London for Strutt & Parker, said: "whatever happens with Brexit, why would you take the risk?"
Mr Pryor said that while Brexit has had an impact, factors including the changes to the buy-to-let tax rules, and greater scrutiny around the sources of the wealth of many overseas buyers of property have had a long-term impact on the market.
Landlords had been able to offset mortgage interest payments against rental income.
But this tax relief was phased out and reduced in 2017 to 75 per cent, and for the 2018 to 2019 tax year the restriction is now at 50 per cent.
He said: "At the moment the yields on London property are between 3 and 4 per cent gross, so maybe 3.2 or 3.5 per cent net, and you can get that from the stock market with less risk right now."
Jonathan Davis, an adviser at the firm of Jonathan Davis Wealth Management in Hertford, has combined data from Rightmove and the Land Registry, which he claimed painted a bleak picture for the London property market.
He said the data shows that there are 55,000 residential properties on the market in London right now, while there were on average 5,000 house sales a month in London.
He said this implies there is 11 months worth of stock on the market at this time, and he said the trend of supply outstripping demand showed no signs of waning.
He said: "Higher buy-to-let taxation is now hurting.
"It will hurt even more as it rises further until it peaks in a couple of years.
"Buy-to-letters are selling up and not buying back in, and they are not being replaced with new entrants."
"It seems to me the oversupply versus demand is rising.
"This month, I note, the members' survey of the Royal Institution of Chartered Surveyors (Rics) said that 65 per cent of London-based estate agents saw property prices fall in April. This is the weakest reading since February 2009.”
david.thorpe@ft.com
