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UK property markets are likely to see continued capital value growth in 2015, especially in prime sectors, but perhaps at a slower late, according to an outlook analysis report. Strong capital value growth was undoubtedly the key theme of 2014 and growth across all sectors was stronger than forecast at the beginning of the year, according to the spotlight report from Savills. Growth could be slower in 2015 and the general election in May will definitely have some effect on sentiment, though in the agricultural and commercial sectors the firm expects the effects to be relatively muted. In the residential markets the threat of a mansion tax, combined with the Mortgage Market Review introduced in 2014 could lead to a more sustained hiatus in capital value growth in 2015. ‘Generally we expect that the macroeconomic story for the UK will remain benign, with base rates remaining unchanged until early 2016, and the combination of low oil prices and recovering incomes giving a boost to the UK consumer,’ the report says. ‘The high returns that will be thrown off by all property sectors in the UK will continue to attract attention, and we expect that UK real estate will continue to deliver high returns in comparison to other asset classes,’ it explains. ‘This will mean that domestic and international demand for prime and good secondary assets will be strong, though we expect to see more focus on supply and demand fundamentals in 2015, rather than just the potential for yield shift,’ it adds. As far as the residential outlook is concerned the report suggests that returns will be less driven by yield shift in 2015, with the best performance coming from understanding where local markets and sectors are in the rental cycle. Following a year of strong mainstream house price growth in 2014 that ran well ahead of the economic recovery, Savills expects much more subdued price growth in 2015. This is particularly the case in London, which has now outperformed the rest of the UK for over nine years and where correspondingly, affordability is likely to look increasingly stretched as interest rates rise. ‘In addition, the mortgage market review is likely to restrict the amount which people are able to borrow. In turn, this is likely to restrict mortgaged buyers' ability to get on or trade up the housing ladder, thereby continuing to drive demand into the private rented sector and underpinning rental growth,’ the report says. ‘The ongoing debate around the taxation of high value property is likely to mean a relatively muted prime market in the run up to the election. While the mainstream market may receive a one off fillip from the stamp duty changes in the 2014 Autumn Statement, prime markets that are bearing an increased tax burden will also have to contend with political rhetoric regarding a potential mansion tax, even though the medium term prospects remain positive,’ the report adds. In the agricultural perspective, Savills expects further growth in UK… Continue reading →
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