During the ten years of the existence of our company, the real estate market in the UK has experienced many events. In an era of turbulence, it can be helpful to slow down, look back and re-examine the changes that have occurred. Let’s recall some of them.
When Alisa Zotimova founded the company in 2012, the real estate market was recovering from the economic crisis of 2008-2009. In 2013, the UK government launched the Help-to-Buy scheme, which aimed to strengthen the real estate market and stimulate housing construction. The scheme allowed buyers to purchase a new build home with a mortgage of 75% of the property’s value, with buyers only required to pay a deposit of 5%. It has been successfully operating for almost ten years and is closing this year. The scheme made it possible for thousands of Britons to purchase their first home.
Stamp Duty changes
Stamp duty tax (SDLT) is the main and almost the only tax on the purchase of residential property. For ten years, its rate and taxation rules have changed several times. Each of its changes had a substantial impact on spending and consumer behaviour. For many, the memory of 2020-2021 is still fresh when SDLT holidays during the pandemic caused a boom and a record number of completed transactions. This was not the only such moment in the history of the British real estate market. Similar events took place in 2016 when the government announced an increase in the SDLT. Both times, buyers were in a hurry to complete the transaction in the spring: in March 2016, even more houses were sold than in March 2021 (138,124 versus 135,666). In 2017, the removal of Stamp Duty for first-time buyers of up to £300,000 saw house prices rise by 3% per year.
We have already discussed in this article how taxes on buying, owning and selling real estate work in the UK. This year, the government announced additional changes to the stamp duty tax. In order to understand exactly what it will mean and how it will affect the market, we have to wait for the final decision of the new Cabinet.
New architectural projects and construction
Over the years, London has had several mayors and completed many infrastructure upgrade projects. One more line of the London Underground, named after Queen Elizabeth ll, who personally opened it, has been launched. Residents of the capital witnessed grandiose construction projects: new office buildings rose in the centre. In 2015 another London landmark Sky Garden opened in one of them. After the 2012 Olympics, new areas were developed, including Stratford which was fully regenerated. The Olympic Village was included in the housing stock, and new sports facilities, parks and squares became an integral part of the city.
In October 2022, after ten years of renovation work, a new residential and office-retail space opened in the building of the former coal-fired Battersea Power station. A modern public open space was created around it with restaurants, shops, cinemas and exhibition halls; residential blocks were built. A whole new quarter has grown around with the American embassy, the buildings of Norman Foster and Frank Gehry. Two tube stations and the Thames Clippers station, a water tram that circulates along the Thames and is part of the capital’s transport system, were opened nearby.
Commercial real estate
In commercial real estate in central London, many projects have appeared, and large developers have come. The use classes in retail real estate have changed: in 2020, a new class E was introduced, which made life easier for many tenants and landlords. Even during the Covid-19 pandemic, new innovative formats continued to emerge in commercial real estate. For example, Amazon Fresh self-service grocery stores without checkouts: we wrote about the opening of the first such store in 2021, and now there are already about 20 of them in London.
Over the past 10 years, the value of the real estate in the UK has been steadily growing. Average house prices have risen by 73% during this time: from £170,902 in August 2012 to £295,903 in August 2022 (according to Land Registry). In London – even more: by 78% from £310,043 in August 2012 to £552,755 in August 2022.
Many were struck by the spike in prices during 2020-2022, at some points as high as 10% year per year. But this is also nothing new, the London market and we, alongside it, witnessed growth of both 15% and 20% per year in 2014-2016. The only episode of falling prices in London in 2019 did not exceed 2-3%. In our previous article, we showed even longer-term trends – starting from the 1970s. Such a view of things from the height of historical and strategic shifts helps to better understand what is happening with the market now. Therefore, we advise our clients to consider the investment potential of a particular property in terms of long-term trends.
Published 25 October 2022
Taxes when buying, owning and selling property in the UK