Knight Frank downgrades prime house price expectations

Knight Frank downgrades prime house price expectations

Knight Frank expects prime central London house prices to fall by 1% this year, down from a prediction of a 1% rise in January.

This prediction was made before Rishi Sunak called for a General Election on July 4th.

Knight Frank said the reform of non dom rules had been causing a degree of hesitation in prime markets since they were proposed in March.

Tom Bill, head of UK residential research at Knight Frank, said: “Under the old rules, individuals could be resident in the UK without being taxed on their worldwide income.

“Chancellor Jeremy Hunt set out plans to limit this period to four years although there were indications he was prepared to loosen the proposals. Not to be outflanked, Labour devised their own tougher rules, which are still to be fleshed out.

“The combination of two different sets of proposals and the uncertainty of a general election has understandably caused hesitation in the property market.”

Forecasts for prime London rents have been cut, to 2% in prime central London, down from 5.5% in its January prediction.

Meanwhile growth in prime outer London has been reduced to 2.5%, down from 4.5%.

Bill added: “Some form of Renters Reform Bill is likely to happen in the short-term, tipping the balance of power towards tenants.”

Strong rental growth has been underpinned by a structural undersupply of rental housing, as well as a competitive jobs market, high immigration, and rising mortgage costs.

At the same time supply levels, while showing some signs of improvement, remain tight.

Oliver Knight, head of residential development research at Knight Frank, said: “It is unlikely that rental supply will increase in the next few years at a level that will materially impact headline rental growth.

“Private landlords in the buy to let sector continue to feel the pinch from higher interest rates and changes to taxation which have resulted in some exiting the sector.

“Build to rent supply is increasing, but not fast enough to replace the BTL homes lost.”