Where is the residential property market going – up, down, or sideways?

Glentree boss Trevor Abrahmsohn says 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.

Trevor Abrahmsohn

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 50 years, what hope is there for the uninitiated?

It is good news indeed that the overall inflation rate has come down to 2.3% (announced this week) and that the IMF are predicting three interest rate reductions. This means that the mortgage interest rate trend will be moving south and this is more good news for the residential property market.

AFFORDABLE INCOME

On the other hand, consumers are coming to the end of their unprecedented low, fixed rate deals and are staring at a remortgage 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.

The middle classes are terrified about VAT on school fees but the Labour Party will struggle to implement this dastardly policy.”

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. 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’.

POLITICS OF ENVY

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 10, the game will be up. However, I think the fear of this tsunami is overstated since a good deal of wealthy international clients do not stay in the UK for longer than 90 days anyway and will probably keep their existing mansions as they are, for their families.

HOUSING

Although the government have not covered themselves in glory by changing the Housing Ministers more times than judge 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.

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.

CONFUSED

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.

From the Glentree cutting edge, we are seeing more homes 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.

SUPPLY IS CONSTRAINED

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 £120 billion this year.

RENT LONG TERM

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.

We should all be worried that Rachel Reeves will attack private pensions.”

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.

TROJAN HORSE

It will be odd to see beer and sandwiches returning to Number 10, 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. However much we believe that the incumbent Tory Party have not won too many plaudits in the past 14 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 and stay tuned. It may even be alright on the night!

Trevor Abrahmsohn (main picture) is Chief Executive of Glentree International


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