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summer 2010
Sherborne SALES INSIGHTKnight Frank
Michael de PeletOffice Head, Knight Frank Sherborne +44 (0)1935 812 236
Michael de Pelet, Head of Knight Frank's Sherborne office, brings you Knight
Frank's response to the recent emergency budget and what it means to you.
CGT was always going to be the main story from this budget. In reality the rise to 28% for higher-rate
tax payers is a non-issue for the housing market.
The rise came into play overnight, meaning that there will be no sudden sell-off of second homes or
investment properties. The new rate effectively takes us back to a level last seen under the pre-2008 rules,
when taper relief enabled a 40% headline rate to be reduced to 24%.
With higher-rate CGT at 28% the argument for property investment still looks strong, and capital gains still
compare very favourably with income tax at 40%.
Very early evidence suggests that the second-home market, which was very strong up until the CGT rise was
first mooted in May and which then promptly stalled, will kick back into life very rapidly. We experienced a
noticeable upsurge in calls to our second-home teams in the hours after the Chancellor sat down.
It was noticeable that the Budget contained strong GDP growth forecasts for 2011 and 2012. The inference
from this is that the Bank of England will be encouraged to maintain a very loose monetary policy well into
2011, if not longer.
This requirement to offset fiscal tightening through monetary policy, suggests that interest rates at their
current levels could well be maintained for longer than was previously thought likely. This will underpin
house prices and also contribute to ongoing low supply in the market as potentially distressed owners are
protected by low mortgage payments.
With the imposition of the new 20% VAT rate being delayed until January 2011, the risk that this change
might add to inflationary pressures is reduced considerably.
The housing market was thought to be at significant risk from measures in this budget. In reality the
changes announced seemed to be carefully considered, and the certainty created by the announcement will
serve to underpin the market.
Total property for sale
Table 1
Market activityLast 3 months, year-on-year change
Sales
12%
200%
Sherborne at a glance
Page 1 of 2
"Very early evidence
suggests that the
second-home
market, which was
very strong up until
the CGT rise was
first mooted in May,
will kick back into
life very rapidly"
Figure 1
What do our buyers want to spend?New applicants, last 12 months
Figure 2
And where do they come from?Buyer locations, last 12 months
17%12%4%
12%32%
24%
< £500k £500k to £750k
£750k to £1m £1m to £1.5m
£1.5m to £3m £3m +
32%8%
51%
8%
Home Region London
Rest of UK International
Property valued for upcoming sale
50%
summer 2010
Sherborne SALES INSIGHTKnight Frank
60
70
80
90
100
110
Jun Jul Aug Sep Oct Nov Dec Jan Feb Mar Apr May30
40
50
60
70
80
Jun Jul Aug Sep Oct Nov Dec Jan Feb Mar Apr May0.0
0.5
1.0
1.5
2.0
2.5
3.0
3.5
4.0
< £500k £500kto £1m
£1m to£2m
£2m to£3m
£3m to£4m
£4m to£5m
£5m +
Charting the market
Figure 4
Days to sale from instructionPrime country property, last 12 months
Your properties, our people
Figure 3
Price change by price bandPrime country property, last 3 months (%)
Figure 5
Average % of guide price achievedPrime country property, last 12 months (%)
Wonderful rural position
Guide price: £1,200,000
Near Dorchester
SOLD5 bedrooms
Views of Glastonsbury Tor
Guide price: £1,250,000
West Pennard
SOLD5 bedrooms
Former rectory
Guide price: £1,850,000
Child Okeford
SOLD6 bedrooms
A piece of history
Guide price: £1,250,000
Stourton-with-Gaspar
SOLD6 bedrooms
Compton Durville
Guide price: £1,250,000
English charm
SOLD8 bedrooms
Norton-sub-Hamdon
Guide price: £795,000
Hamstone house
SOLD5 bedrooms
Michael de Pelet
Head of Knight Frank
Sherborne
Simon Barker
Partner
Ed Cunningham
Partner
Christopher Bailey
Negotiator
Knight Frank Sherborne+44 (0)1935 812 236
15 Cheap Street
Sherborne DT9 3PU
KnightFrank.co.uk
If you have any queries or would like to obtain additional information on the UK or international housing markets please contact: Liam Bailey, Head of Residential Research, +44 (0)20 7861 5133, [email protected]
© Knight Frank LLP 2009 - This report is published for general information only. Although high standards have been used in the preparation of the information, analysis, views and projections presented in this report, no legal
responsibility can be accepted by Knight Frank Residential Research or Knight Frank LLP for any loss or damage resultant from the contents of this document. As a general report, this material does not necessarily represent the
view of Knight Frank LLP in relation to particular properties or projects. Reproduction of this report in whole or in part is allowed with proper reference to Knight Frank Residential Research. Knight Frank LLP is a limited liability
partnership registered in England with registered number OC305934. Registered office: 55 Baker Street, London, W1U 8AN
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