Managing partner at black brick
Q. How do you think the rise in stamp duty, which will rise from 4 to 5 per cent for properties over £1m from 6 April, will affect house prices?
A.The rise will definitely affect the market outside of London, which is already slow due to lack of mortgage supply. For UK buyers who have saved just enough to buy their dream house the increase will obviously be an issue and may result in the vendor having to accept slightly less for their property. We have noticed an urgency with our domestic clients wanting to find a property and complete before the 5th April to avoid having to pay the rise.
In prime Central London it will have little or no effect. An increase of 1 per cent in stamp duty on properties purchased at over £1m means a difference of £10k per £1m. This is unlikely to slow the market down, especially if the current stock shortages continue. Also, some buyers are able to make a saving on their stamp duty liability if the property they buy is owned by a company rather than a person. We feel the rise is very unlikely to deter international buyers particularly from the Middle East and other emerging market countries who are looking for a safe haven to invest their money.
Q. I'm considering buying a property off plan. It won't be ready until 2015. What are the potential risks or downsides?
A.When it comes to new build, our advice to clients is to tread carefully. We are not against investing in new developments but it can be risky. If the market drops, you are still committed to buying once you have exchanged contracts and if the property is worth less than when you exchanged, the bank will only lend you based on the current valuation. This could be a real issue, especially for new builds outside of central London and in parts of the UK where prices may fall over the next few years due to spending cuts, rises in unemployment and so on. You are then faced with either losing your deposit or having to find extra money in order to complete. We saw a lot of this happen in the last property market downturn, with many failed completions on new build developments. If the scheme is in central London then you should ask the developer to show you their previous completed projects to see if they are well built, have sold and are in a good location. As with all new developments, you should take into account how many flats will be built as often the bigger blocks will have apartments that are unsold or un-let which could drive re-sale and rental valuations down. New builds tend to appreciate much more slowly over time, especially in high-density areas where many of the flats are identical.
However, buying off plan can be a good idea for those who are struggling to find large apartments, as there may be scope to put two flats together if you are involved early enough. Developers may offer discounts or incentives as they are often keen to sell apartments off plan to meet targets. Other factors to consider are that new flats tend to be a lot more energy efficient – with double glazing and wall insulation as they have to adhere to new building regulations and usually have a lot of added perks such as a 24-hour porter, gym, pool and underground parking, which period properties do not necessarily have. There have been some success stories in London for certain new build developments. For example, The Knightsbridge – investors who bought into the development on day one have done exceptionally well. It is now an established, highly desirable address, much sought-after by international clients who like the location, the security and services offered, and are willing to pay a premium for it.