In this issue of our bi-weekly roundup of the news and opinion relating to the London property market we take a look the future of UK interest rates, why London landlords are still bullish regarding their investments and the London penthouse apartment that sold for an incredible £140mil to an overseas investor.
UK Interest Rates 'Will Stay At 0.5% until 2014'
It seems that UK property investors can look forward to many more months of good returns as the Ernst & Young ITEM Club, which bases its forecasts on the Treasury's own model of the economy, predicts that the Bank of England's base rate will remain on hold until 2014 in order to offset the coalition government’s ambitious austerity measures.
The ITEM Club’s latest report echoes the sentiment of both the Centre for Economics and Business Research (CEBR) as well as the British Chambers of Commerce (BCC). The CEBR predicts no rise in interest rate for at least 18 months, while the BBC says rates will be on hold until at least May 2011. Only a third of economists now expect a rate hike in 2010, according to a recent poll by Reuters.
UK property investors have now enjoyed the benefits of a 0.5% base rate since March 2009 with most paying a mere 2.5% interest on their investment mortgages. This along with some good growth in the private rental sector has led to some substantial gains from rental income.
The Bank of England held rates at 0.5% for the 17th consecutive month in August
The Governor, Mervyn King, warned that it would be some time before the Bank’s base rate returns to ‘normal’ levels.
King maintained that the economy should not read too much into Q2’s GDP growth of 1.1% and that the UK faces the continuing challenge of re-balancing the economy from consumption towards net exports.
The Bank of England has since cut its forecast for GDP growth and now expects the economy to grow by around 2.5% in 2011, down from its previous forecast of about 3.4%. It also admitted that inflation will be above the 2% target until the end of 2011, significantly longer than the Bank had predicted in May.
London landlords expect further property price increases despite July house price drop
UK House prices have dropped for the first time in 15 months in July, causing the annual rate to weaken for the first time in over a year, according to property data company Hometrack. This follows claims by Nationwide and Halifax, two of the UK’s largest mortgage lenders that the robust recovery in house prices is drawing to an end. Yet two new reports indicate there is still much confidence in the housing market.
In a resent survey conducted by the online property portal Rightmove, more than three-quarters of the 20,000 people surveyed said they still believe that house prices will either be the same or higher in 12 months' time. This suggests that there is a strong sense that the property market's 'dark days' are behind us and that prices will stabilize in the medium term.
Doomsayers predicting a "double dip" fall in UK house prices are wrong, experts say.
The UK house-price recovery will continue through 2014 as low interest rates and a shortage of supply buoy the market, the Centre for Economics and Business Research said in its latest statement. The London-based research group downplayed recent reports indicating the house-price recovery is fading saying "forecasters projecting a double dip have got it wrong" and have "ignored the housing market fundamentals".
Despite the slight house price correction in July the CEBR said prices will increase 4 per cent this year and continue rising until 2014, mainly due to a shortage of homes in the UK and low interest rates.
International buyer snaps up £140 million London apartment
The penthouse apartment, believed to be the most expensive in the world, is set to be sold to an anonymous international buyer as the wealthy of the world keep snapping up London properties despite reports that the UK housing market is slowing. The penthouse at One Hyde Park in Knightsbridge, will stretch across two floors and boast six-bedrooms, bullet-proof windows, a panic room, iris scanners and views across Hyde Park and the Serpentine lake.
The new owners – who have already exchanged contracts – will also have access to 24-hour room service from the neighbouring Mandarin Oriental hotel, and protection from SAS-trained security guards. The much anticipated complex will total 80 apartments and include luxury spa, squash courts and a private wine tasting facility.
The apartment will cost more than £6000 (around R69, 000) per square foot compared with the local Kensington and Chelsea average of £1214 per square foot and the London average of £450 (around R5,000)
