Market commentary must be so confusing for ‘the man on the Clapham
omnibus’. If I’m confused, and I have been in the business for fifty years, what
hope is there for the un-initiated?
It is good news indeed that the overall inflation rate has come down to 2.3%
(announced May 22nd) and the IMF are predicting three interest rate reductions,
which means that the mortgage interest rate trend will be moving south, and this
is good news for the Residential Property Market.
On the other hand, consumers are coming to the end of their unprecedented low,
fixed rate deals and are staring at a re-mortgage rate of up to 3% increase which
is probably about double the rate that they were previously paying. This cuts a
huge swathe out of their affordable income, which is not such good news.
Politics of envy
The middle classes are terrified about VAT on school fees, but I have heard on
the grapevine that the Labour Party will struggle to implement this long predicted,
dastardly, policy on private schools since, amongst other good reasons, these
institutions will be able to reclaim VAT on any capital expenditure spent over the
years, which could cost the government a great deal of money and therefore, all
this hyperbole about spending their largesse on more doctors and nurses, is all
‘Jackson Pollocks’ (…at least, rhymes with it!).
This was always going to be a ‘siren call’ of politics of envy, which will
undoubtedly generate three cheers from the left-wing zealots of the Party but will
never be efficacious.
The non-doms have long been aware that the moment the Labour Party get the
keys to Number Ten, the game will be up. But actually, I think the fear of this
tsunami is overstated, since a good deal of Glentree’s wealthy international
clients, do not stay in the UK for longer than ninety days anyway and will
probably keep their existing mansions as they are, for their families.
More Housing Ministers than Bernard Rix’ revolving doors!
Although the government have not covered themselves in glory by changing the
Housing Ministers more times than Bernard Rix’ revolving doors, it is interesting
to note that Sir Kier Starmer didn’t even include this subject as one of his six
political pledges, that he released recently. Clearly, this much vexed, important
subject, is not top of his agenda list despite what he has been saying about
taking a sledgehammer to nimbyism and the planning chicane, which has held up
so many worthy housing applications for re-development.
Even the government seems to have resigned themselves to accepting that there
will be a shortfall in new homes from the target figure of 300,000 per annum,
which is a great pity.
In recent reports, Rightmove claim that house prices are rising but I think we
mustn’t get confused between asking prices and real underlying values, since the
former is what we call, ‘marketing froth’ and the latter is terra firma.
Glentree’s cutting edge
From the Glentree cutting edge, more homes are coming onto the market for sale
without a corresponding increase in demand, despite this being the best time of
year for activity. This does not mean there will be a cataclysmic collapse in
values, but it will significantly elongate the time to sell properties and sellers will
probably end up achieving a full value at the end of the day, as long as they are
patient and are not entwined in an agitated chain of deals.
Activity in the rental market is subdued with little stock available, since, due to the
reduction in Capital Gains Tax, a number of landlords have sold their property for
a variety of financial reasons and consequently, supply is constrained.
I believe that residential property values will not change greatly during 2024 and
given the constraints of a newly embedded Labour Party, they will probably be
hamstrung from frivolous spending plans and will ironically, follow a similar
economic path of the Tories, since they cannot increase the government budget
deficit, which will be circa £120billion this year.
This is the reason why, if you are 75+ and are downsizing, we advise clients to
rent long term instead of buying and by doing so, save the Stamp Duty and
invest the cash in a tax efficient manner which could involve distributions to
worthy members of the family for their housing needs.
A return of ‘sick Britain’?
We should all be worried that Rachel Reeves, the new Chancellor in waiting, will
attack private pensions and we can see rumblings of this in the press and when
firebrand Angela Raynor exerts her left wing influence on union Labour working
practices, I fear, with good reason, that unemployment will rise and before long
we will see the return of the dreaded secondary picketing, which was the
hallmark of ‘sick Britain’ in the 70s.
She will take great pride in repealing a number of Thatcher’s union reforms which
have kept Britain strike free for so long now and helped to maintain one of the
lowest unemployment rates in the G7.
It will be odd to see ‘beer and sandwiches’ returning to Number Ten, rather than
‘souffles and foie-gras’. Let’s hope that the new-found moderacy of the Tony
Blair inspired Labour Party is not a trojan horse, since however much we believe
that the incumbent Tory Party have not won too many plaudits in the past
fourteen years, the others could be a lot worse.
I still believe in the greatness of Britain and its ability to reinvent itself, so keep
the faith, stay tuned, since it may be alright on the night!