2017 was dogged by fears over the potential fallout from Brexit, you only had to turn on your TV, leaf through a newspaper or visit any news site to see impending economic doom writ large. Despite this, the housing market appeared relatively untroubled – even with its obvious supply problem – prices continued to rise, albeit slowly, and Halifax reported the number of first-time buyers hitting a 10-year- peak at the close of the year. Can we expect more of the same in 2018? Or, is this the year the market’s supply time bomb goes off and uncertainty over Brexit begins to impact the housing market? We take a look at what we know so far and the forecast for the next 11 months.

Falling House Prices
While 2017 was hardly a box office year for the housing market, it could be about to get considerably worse.
Towards the end of last year, economists and house market experts alike began to notice gathering storm clouds on the horizon. Major lender Halifax reported a fall in the price of the average home by 0.6% to £225,021 in December, while the annual growth rate declined to 2.7% in the three months to December from 3.9% in the previous three months.
A number of commentators are predicting a UK price growth of a meagre 1% – a figure that would see a decline in property values in real terms (once inflation is accounted for). The Financial Times goes even further: forecasting no price increase at all, making the UK one of only 3 major housing markets to experience no growth in the coming year (the other two being Greece and Norway).
What’s more, according to the Royal Institution of Chartered Surveyors (RICS) London and the South East is expected to bear the brunt of the slowdown, with both set for “modest price declines.” This comes in striking contrast to the previous decade in which, despite the fallout from the global financial crisis, London saw a growth of some 70%.
What’s causing this sudden slowdown? Well, it largely depends where you look – Economists are predicting a range of factors will place strain on the housing market in 2018. Continuing economic and political uncertainty in the wake of Britain triggering Article 50, the possibility of a further hike in interest rates following November’s base-rate rise from 0.25% to 0.5%, low consumer confidence, stagnant real wages, and mortgage affordability issues could all act as hurdles to market growth.

Building Activity, Mortgage Approvals, and Completed Sales to Remain Flat.

Although the number of affordable homes being built is increasing, up 27% in 2016-17 according to the Department for Communities and Local Government, the figure remains low and unlikely to provide any real stimulus to the bottom end of the market. The chancellor’s move to abolish stamp duty for first-time buyers on properties under £300,000 may provide a boost to those just getting on the ladder – provided it doesn’t push prices up
further. However, most commentators, including RICS, are predicting this will have little bearing on 2018.
Echoing this, enquiries from new buyers have fallen steadily for the past 8 months, likely in part due to the affordability gap, but also due to the squeeze on real wage growth and sustained economic uncertainty.
Halifax’s managing director, Russell Galley, told the Guardian: “The housing market in 2017 followed a similar pattern to the previous year. House price growth slowed, while building activity, completed sales and mortgage approvals for house purchase all remained flat”. As a result, Galley predicts that uncertainty and stagnant wages will continue to put potential house buyers off in 2018, although a shortage of properties on the market, low levels of housebuilding, high employment and low mortgage rates will avert a major crisis. All of which points to a rather insipid year to come for sales and completions, as the housing market continues its wait in the Brexit antechamber.

The Rise of Bitcoin Buyers?
Putting the doom and gloom momentarily aside, one of the more bizarre early developments in 2018 has been the rise in sellers accepting cryptocurrency. December saw the first houses in Britain bought using bitcoin, with the Land Registry even providing buyers with the opportunity to record the purchase price in cryptocurrency.

So, are we on the cusp of a paradigm shift in the way we buy and sell property?
In short: not yet. Bitcoin undoubtedly has advantages to offer conveyancing: due to its nature it has the potential to speed up transaction times – it’s volatility means buyers purchase outright, exchanging and completing on the same day. What’s more, its avoidance of the banking system negates any delays occurring from that.

However, there are some very large caveats attached to bitcoin. Firstly, it requires an enormous amount of due diligence work on the part of any conveyancing firm instructed to act on a bitcoin transaction. Establishing where the bitcoin came from isn’t easy, as by their nature cryptocurrency transactions are anonymous. It also involves the creation of contracts to protect both the buyer and seller from fluctuations in the exchange rate. Plus, calculating any capital gains tax is nigh on impossible. But the caveats don’t end there. Bitcoin is highly volatile, which doesn’t necessarily square with property investment – traditionally a low-to- medium risk, with low to medium returns.

Whereas Bitcoin is the polar opposite: its potentially dramatic returns offset by its high risk as a transaction medium. This changeability is likely to put all the but the bravest buyers off using bitcoin. Alongside this, despite its current popularity among speculators, there remains deep uncertainty surrounding Bitcoin. Some have even described it as being similar to the 2008 housing bubble which brought the World economy crashing to its knees. Which means, that even the world’s leading economists are unsure whether Bitcoin is a passing fad, interesting experiment doomed to failure or set to become part of all our daily lives.

Perhaps the property market’s word of the year will be “uncertainty”, it certainly feels appropriate a month or so into 2018. With unpredictability dominating the news cycle from the economy and global affairs to the cryptocurrency craze, perhaps it’s only natural that the housing market, so often a barometer of the UK’s financial health, is gripped by the same. One thing’s for certain: we’ll be watching the year ahead with bated breath.

Following the Scottish decision in July to scrap the ‘Right to Buy’(RTB) program from 1 st August, Wales are set to follow their Caledonian cousins in the next 12 months. The policy which was introduced by Margaret Thatcher’s Conservative government in 1980 has spent most of its existence steeped in controversy. The Labour Party has stated that the 138,000 council and housing association homes sold to tenants since its inception represent the removal of around 45% of the social housing stock from circulation. While others have trumpeted the move as a victory for truly affordable housing, and a move away from the costly private rental sector where some 40% of RTB properties end up.

Approval of the decision has not been universal; some commentators have viewed the move as a chill on social mobility which condemns council tenants to a lifetime of social renting. Others have questioned whether local authorities will be able to build fresh housing stock on the scale required to service those who would have formerly benefited from RTB. Which side of the divide you sit is likely to depend on your politics, but what is clear is that the Welsh Assembly’s decision, when taken with SNP’s decision in the summer, has the potential to shake up the way the UK goes about the supply of housing stock for first-time buyers.

So how is it going to work in Wales?

According to Carl Sergeant Cabinet Secretary for Communities and Children; the scaling back of RTB is running concurrently with fresh plans to build more social housing and an increase in saleable stock. Government investment of an additional £290 million in Wales’ ‘help to buy’(HTB) shared equity loan scheme proposes to make some 6,000 additional houses available to first-time buyers by 2021.

It is hoped that further investment in HTB, alongside a commitment to build social housing will provide a ‘decent place to live’ for all; whether first time buyers or society’s most needy. At the same time the prohibition of sub-letting help to buy properties and the end of RTB; should keep social housing and stock targeted at first time buyers in circulation, rather than in the hands of private landlords.

Are we likely to see something similar in England?

In short, it’s too early to say. There has been pressure in sections of the media and a damning analysis of RTB by the Local Government Association (LGA); which revealed in August that the replacement of RTB stock dropped 27% in 2015-16 from the equivalent period in the previous year. The LGA’s analysis showed that in 2015-16 for the 12,246 council homes sold under RTB, just 2,055 replacements were started by councils. These figures also represent part of the reduction in social housing from 31% to 17% of total housing stock since the scheme’s inception in 1980.

To this backdrop, the LGA has warned that continuing RTB risks further stagnation in affordable housing, increased pressure on the council home waiting list (which already numbers 1.4 million people) and even an increase in homelessness.

Despite this pressure, the current government has so far shown little interest in ending RTB. In fact, the scheme did appear to be slowing towards a natural demise before its relaunch in 2012, with an offer to quadruple discounts for London council tenants. In an August statement The Department for Communities and Local Government (DCLG), simply reiterated its commitment to invest in affordable homes. Promising to step in and build homes for local authorities who fail to begin building replacements within the 3-year deadline from sale, by which they are supposed to abide.

One has to consider the difference in ideology between the Welsh and Scottish governments and England. On the one hand, Wales & Scotland share broadly left-of- centre governments (Labour/Plaid Cymru & the SNP respectively) and the likely commitment to social housing that brings. On the other England is governed by an emboldened and ideologically determined conservative government committed to large-scale investment in housing stock. Lest we forget, RTB was a flagship tory policy during the 1980’s after all.

Where a Teresa May government stands on the subject is likely to depend on how far the ‘one nation conservatism' envelope is pushed. Something which at this time is unclear, but a policy switch seems unlikely given the current popularity of the conservative administration in recent polls.

Perhaps there is some future in the scheme announced by London's very own Barking and Dagenham Council in June. The scheme allows council tenants to purchase a share of their property, leaving the council with a minimum 30% stake and first refusal should the tenant look to sell on the open market. The aim being that the tenant has a route onto the housing ladder and the council and option to replenish the social housing stock.

Either way, it would appear that RTB in its current guise is going nowhere fast.

As the dust begins to settle on June’s result (albeit with the lack of certainty no activation of Article 50 brings), a cursory look at the morning papers could leave you with the impression that the housing market is in the latter stages of an apocalypse.

So, to paraphrase a famous hobbit: ‘is there any hope’?

Well yes, the picture in September looks nothing like as bleak as it did on June 24 th . From East Yorkshire bucking the trend to an apparent stabilisation of transaction levels in July, there are a few reasons to be cheerful despite all the gloom. We run through the weird (yes East Yorkshire) and the almost wonderful stories to bring some much-needed hope to proceedings.

Transaction levels virtually unchanged from June to July

First up, the number of transactions for value over £40,000 across the UK rose very slightly from 103,450 in June to 104,200 in July, according to HMRC. While the figure represents a sharp decline from the 5.1% increase seen in the same period last year, this must be taken in context with the potential fallout from the changes to SDLT earlier in the year. It’s entirely possible that due to ‘front loading’ (i.e. the glut of home buyers looking to beat the deadline in April) we may see slower than anticipated growth until the last quarter of this year.

Furthering this point, this relative stagnation (as opposed to sharp decline) is reflected in HMRC’s seasonally adjusted figures which show a drop in transactions of just 0.9%. Leading more bullish commentators to attribute the stagnation to the market quickly stabilizing after the short-term shock of a Brexit vote.

While ‘stagnation’ is not growth, and hardly breeds the same positive headlines, it also isn’t the ‘terminal decline’ or the catalyst for a 2008 level crash predicted in some quarters.

A coming reduction in house prices

According to Estate Agent Countrywide, the vote to leave the European Union could be a catalyst for a nationwide reduction of 1% of house prices. The firm’s economists are also predicting a drop of 6% in London alone by the end of the year.

The rationale behind this is the expectation of a severely weakened economy over the coming months, and the crisis in consumer confidence and household incomes this usually brings. Alongside slower than expected house price growth, particularly in London’s prime markets and the dent in expectations of future capital gain that follows it.

So where is the positive in all that? Well, firstly the potential boon of foreign investment. A weakened sterling and a reduction in property prices represent an attractive ‘discount’ for foreign investors. While this won’t solve the nation’s affordable housing crisis it should at least keep the wolf from conveyancer’s doors.

Furthermore, there is hope for UK nationals, basement-level interest rates and a reduction in grossly inflated house prices, may coax some life into the first time buyers’ market. This does, of course, rely on the caveat that household incomes remain relatively stable and the rental market continuing its ascent to the heavens. But, we promised you good news and good news you shall have.

The Yorkshire anomaly

The strangest of the bunch, and also the hardest to verify, according to some local firms in East Yorkshire, the area is bucking the Brexit blues. According to Goole and Pontefract based firm Heponstalls, the usually quiet month of August has seen an incredibly strong performance in the local market, with the firm being ‘inundated’ with instructions.

This comes in the wake of July’s Figures from the Residential Market Survey commissioned by the Royal Institute of Chartered Surveyors (RICS), which indicate a nationwide fall in sales and enquiries following June’s vote.

So what is behind East Yorkshire defying the odds? Is it simply a case of anecdotal evidence and bullish rhetoric masking the real picture, or perhaps the mini development boom the North East the was enjoying pre Brexit? The real reason may be far more complex and with far wider ramifications for the housing market as a whole.

Research conducted by Haart Estate Agents indicates that the effect of Brexit on house prices and sales is regional. In particular, those constituencies which voted out, appear to be performing more strongly than those who voted remain. Haart’s figures show that in leave constituencies the proportion of sales which fell through was 2% lower in the weeks following the result, while in London the figure rocketed by some 50%. A great example of this is Barnsley, which voted overwhelmingly to Leave (68%), but saw a 39% reduction in sales falling through after the Brexit result was revealed.

A look into listings since the referendum yields similar results, Doncaster, another area where the majority voted for Leave (69%), saw a 25% rise in the number of listings in the weeks since the referendum result. While Bristol, a city with a majority remain demographic (62%) has seen a 52% drop in registrations at Haart Branches and a 42% increase in abandoned sales.

This apparent bullishness in the country’s regions is symptomatic of the underlying reasons for Brexit (though that’s a debate for another forum), but should provide some succor to those conveyancers operating outside of the UK’s major metropolitan centers’, who, after all, are the most ‘at risk’ in a contracting housing market. As for those conveyancers operating in Britain’s major cities hope comes in the form of foreign investment, which as previously mentioned has real potential with the prospect of weakened sterling.

Overall, while things remain far from ideal (this was true before Brexit), the housing market is responding to adversity with some of that famous ‘British pluck’. Where the next 12 months will take it, is at this stage impossible to predict, but dare we say the green shoots of recovery are there?

Generation rent, the cliché that keeps on giving, but what happens when even that becomes out of reach for ordinary Londoners?

If recent figures produced by the Ministry Of Justice are anything to go by then this is exactly what’s beginning to happen, with some 42,728 forcible evictions in England and Wales alone in 2015. This represents a 2% increase on 2014 and an incredible 53% in the last 5 years as austerity bites harder than ever. To quantify these figures, this represents an estimated 170 tenants evicted a day in 2015. London, true to itself as always, tops this ignoble chart, with 16 of the 20 worst affected boroughs within the capital. Even more predictably it ‘boasts’ the worst hit borough throughout England & Wales in Newham, with the rate of repossessions equivalent to 191 per 10,000 households in the borough.

All of which rather poses the question why? More importantly what can be done to make things better?

Lets begin with the why, broadly speaking causation boils down to the same three sources which have received such high media coverage of late.

Firstly the housing stock available to first time buyers remains woefully low, even with the introduction of ‘right to buy’ initiatives under the current administration. Indeed the past few years have seen the building of affordable homes slump to a post war low of 135,500 homes in 2012-13. Nor has there been a marked increase in the years following with 141,000 built in 2013-14. A little over a decade ago now the Barker Review of Housing Supply noted that about 250,000 homes needed to be built per annum in the UK to avoid a critical shortage of homes (and the consequent spiralling of costs). Aside from the Labour Administration in 2006-2007 (219,000) no government has come close to this target, even Labour’s effort came pre financial crash. While the financial crash makes this failure understandable it does not alter the likelihood that until more affordable homes are built increasing numbers of the population will be forced into expensive and unstable rented arrangements.

Leading on from this is the lack of controls upon private landlords. The viability of rent controls is something which has been much debated recently in media circles (more on which later) but the logic which sparked the debate is irrefutable. It’s a simple case of supply and demand, less housing naturally means higher rents and greater competition between perspective tenants. While this doesn’t necessarily produce Dickensian landlords, even the most altruistic lessor is going to rent at market value safe in the knowledge that if the tenant can’t pay, someone else will. When market rates are inflated high above stagnating wages, we have a problem.

Admittedly culpability does not solely rest with private landlords, with 19,093 evictions in England by social landlords in 2015. This actually supports rather than counters the evidence of a wider malaise, when social housing becomes unaffordable the system is failing in its most basic of functions. To suggest that this is purely down to spiralling rents however would be a mistake, although Shelter puts the average housing association rent at nearly £90.00 a week in 2013. More important is the affect of successive cuts to welfare which have come to characterise post-crash Britain. Without the vital safety net welfare provides, society’s most vulnerable are going to struggle to maintain rent in ever increasing numbers.

For evidence of how disastrous this situation has the potential to be look no further than Shelters Rent/Mortgage v Savings figures for 2013. These figures include such highlights as 44% of working families who would agree with the statement that they could not pay their rent or mortgage for more than one month using savings were they to lose their job. That’s working tenants potentially one pay check away from eviction and homelessness, not those dependant solely on welfare. This figure grows steeper still in London with 49% of those surveyed stating they could not maintain their mortgage or rent payments for a month were they to become unemployed. Without sufficient savings to cover even a months rent and with an ever contracting welfare system, what safety does the modern tenant possess?

So far, so gloomy, but short of an unlikely end to austerity or a with inflation rise in wages there are other potential solutions.

The first is obvious and can be condensed into 3 words: build more houses. Whilst private development is steadily churning out new builds, housing associations continue to lag behind. Compare 2014’s figures, 115,000 new houses built by private developers, a paltry 23,000 by their social counterparts. To put that figure in perspective, given there are around 1,500 housing associations in England and Wales alone that represents an average of 15 houses a year per association. Not only this but as Ross Clark of The Spectator pointed out in an article last year, housing associations have received £23 billion in central government grants in the period 2001-2015, enough to cover the construction of 230,000 homes a year. This represents a systemic failure on the part of the government to incentivise the associations to get on with the mucky business of actually building some houses. If we’re to avoid a very real crisis in the next decade this needs to change.

Another option is the imposition of rent controls on private landlords, the case is often made that this would empower tenants and tip the balance away from landlords. The ‘German Model’ is often cited as a successful example of this, with charging rent over 20% of the rate for similar properties illegal in many jurisdictions. On the face of it, this appears a relatively simple to implement and ‘catch all’ policy, to head off the threat of a renting crisis. The caveat however is that economists of every hue are in rare unanimity that in practicality rent controls will produce the opposite of the desired effect. Simply put caps give home owners less incentive to rent out a room and developers less likely to build rental property. Meaning in the long term, less rental opportunities, a more competitive market for tenants and ultimately higher average rents. Hardly the answer either!

What is clear is that a systemic problem requires a systemic solution. Successive governments have failed to meet housing targets, have slashed much of the welfare which acted as a safety net for low income tenants and failed to incentivise the construction of social housing. All of which points to an elephant in the room, which if not addressed, threatens to cause a very real housing crisis  in the third decade of this century.

 

2016 looks as though it might be another successful year for the property market. Provided of course we don’t succumb to a certain Chinese Bear, in the next few months.  January’s announcement the government will commit to 13,000 new homes on brownfield sites in the South East beginning this year represents the largest commitment by government to public housing since the regeneration of East London’s Docklands in the late 1980’s.  With the conservative administration ‘pulling out all the stops’ to reach its target of 1 million new homes by 2020.

Elsewhere construction as an industry is having something of a purple patch with private construction forecast to rise some 5.5% over the coming 12 months.  Alongside this the Construction Products Association estimate that overall productivity will rise 4.2% this year and a further 3.5% next.

So far so rosy, but is it all good news? As with any projection hailed from the rooftops it isn’t without its caveats and Naysayers.

The First major doubt arises from the capacity of the construction industry to deliver on its targets. While George Osbourne’s pledge to construct 400,000 new homes across the UK no doubt has developers from London to Cumbria salivating, it remains to be seen whether the construction industry can cope. Many within the industry have cited a shortage in cheaply available key materials and skilled personnel as key barriers to growth of the kind being forecast by central government.

A further dampener on the otherwise sunny predictions is the accusation that these new developments will be a postcode lottery. With developers increasingly cherry-picking the best brownfield sites (for best read within the capital’s sphere), it’s likely that any social good these developments serve will be confined to the already deluged market in the capital. This comes at the expense of those regions which are crying out for expansion and development, the former ports and mining towns of the North East being a particularly glaring example.

The ‘postcode lottery’ has a further aspect. Namely the difference in planning outcomes from case to case, region to region. The figures given work on the assumption that planning permission will be obtained smoothly or even at all.  As anyone who has ever had an extension built will attest this is far from guaranteed. These developments will vastly differ in scale and local importance depending where they are. The impact on old industrial eyesores in East London is going to be incomparable to the impact on the community of a small village in the Valleys. For these reasons success is far from guaranteed.

Thirdly and perhaps most crucially a sense of balance needs to be brought to the argument. The much vaunted 5.5% increase in private development must be counterbalanced against the CBA’s projected 5% drop in public housing development. Rather unsurprisingly the investment appears to be falling where it is least needed. Which poses the question how far a 0.5% drop in growth (when private and public development are combined) represents a positive projection? Spin aside, it remains incontrovertible that these projections are still a long way from the kind of figures we were talking about in the boom years 1990-2008.

So a real mixed bag objectively, it’s not too much of a stretch to suggest that your reception of these figures will have much to do with your political affiliation. For the moment the jury is very much still in session on how 2016 will pan out for the property industry.

So it appears that the spectre of Land Registry privatisation is once again rearing its ugly, ill-conceived head. Many within the industry thought the battle had been won, such was the overwhelmingly critical response to initial consultations.

November’s Spending Review and Autumn Statement however has it firmly back on the table. The policy document published 25th November states that the government will ‘consult on options to move operations of the Land Registry to the private sector from 2017’. It being a new year and the tail end of the season of goodwill to all men, we thought we’d offer up a brief summary of the major objections to privatisation.

Common parlance holds the rationale for privatisation as the private sector providing greater efficiency than its public sector counterparts. This simply does not apply to the Land Registry.

Firstly the Land Registry has no competition to spur it onto greater heights, it exists as a monopoly service. As we’ve seen with other monopolised services, such as localised rail networks, selling to private investors does not always equate a better service.  Moreover it performs functions mandated by the legislature in Acts of Parliament. For example guaranteeing the titles to registered estates and interests in land, something there is  little precedent for privatising.

From an efficiency standpoint the proposals make little sense. It is difficult to see how the acquisition of the Land Registry  will dramatically improve its service or profitability. Most professionals who use the Land Registry will testify that many of its services are available electronically at the click of a mouse. Furthermore its current structure of regional offices ensure a degree of local knowledge. Something the outsourcing likely entailed in privatisation will bring to an end. On the other side of the coin the Land Registry, despite only being required by statute to ensure that its income covers expenditure, generates a healthy surplus. In 2014 & 2015 it generated a surplus and paid a dividend to the Treasury of £26.6 million and £19.1 million respectively. What’s more this is a service which requires no state funding, produces large annual profits and pays directly back into the treasury. As such it really deserves to be treated as a national asset rather than a quick buck for the current administration.

The proposals represent the worst in myopic short-termism. Publicly at least Mr Osborne is not following the ‘competition’ as justification for the move. Instead the basis for November’s announcement is the sale of profit generating public services to bolster the governments ongoing duel with spiralling public debt. Whilst the short term benefits of this are entirely logical, the deficit is increasing and the Land Registry does run at a profit. It represents a high risk strategy on the part of the Conservative administration. By privatising profitable public bodies the current administration risks denying future governments an important source of funding. The cynics amongst you may contend that this may well be an ideological rather than fiscal move but either way it is clear that once the Land Registry is out of public ownership it will be difficult to bring back. As a final consideration it also has to be doubted how far the £1 billion any sale is expected to generate will service either the deficit or public debt.

The final major contention to privatisation is a human one. The human cost is likely to be twofold, most obvious is the potential loss of employment for some of the Land Registry’s 4,500 strong workforce. As with any privatisation some ‘streamlining’ or ‘reallocation’ of public sector jobs is almost inevitable. In the current climate we can ill afford the loss of another major public sector employer. Secondly there is a real fear amongst many conveyancers that the lack of any competition will lead to private investors holding Land Registry data to economic ransom. Whilst this will be problematic for conveyancing departments up and down the country it will also serve to hit beleaguered home buyers in the pocket further.

To conclude the Land Registry is quite plainly unsuitable for privatisation. It runs exceptionally well for a body of its nature. It generates an annual surplus and a sizeable dividend for the treasury, an asset privatisation will deny future governments. It is unlikely to benefit from any great enhancement in either service or profitability by virtue of private sector ownership (without of course upping fees). Finally it is likely to cost public sector jobs at a time when unemployment is beginning to decline. All this for a short term fix, is it worth it?

Continuing our theme of housing market fluctuations, it seems the season of ghosts and ghouls produced a resurrection of its own. After last week’s piece on the apparent plateau of super-£1m value properties on sale in London, the latest figures produced by estate agents Reeds-Rains make for interesting reading.

Figures produced by the Reeds Rains England & Wales House Price Index reveal that whilst overall property transactions in London are down 4% on quarter 3 in 2014, values continue to rise steeply.  Indeed, the figures show a staggering average increase in value of £24,636 since the same period in 2014, this equates to 75% of the average Londoners yearly salary.

The further you delve into the figures the more alarming or, depending on your perspective, positive they become. Estimates put October 2015 as being the strongest October since those head pre-crash days in 2007, with an average spike of £2,500 a property throughout England & Wales or an increase in real terms of around £80 a day.

Most commentators attribute this resurrection of growth in the housing market almost exclusively to London and the South East as drivers. London alone has seen an annual growth rate of around 4.4%, whilst the South East tops that at 6.1%, the only major reason outside of the south east with a comparable growth rate is Mr Osbourne’s ‘Northern Powerhouse’ (or Manchester to the rest of us) sitting on an annual growth of 5.0%.

The real question this raises is how long can this kind of growth remain viable, with many of London’s more exclusive borough’s all but out of reach for those outside of the much maligned 1%. It’s interesting to note that the figures also revealed that much the recent price increases in the capital have been in the unfashionable areas of Harrow, Newham and Barking and Dagenham, suggesting a move to new markets for prospective buyers as even those boroughs traditionally associated with sustained growth (Hackney et al) become unobtainable for the average Londoner. This of course whilst the top end of the market continues to slow (see last week’s post) as the increase in stamp duty continues to nip at property markets well heeled.

Whilst seemingly bleak for the average Londoner these figures do come with a caveat and need to be viewed in their wider context. Whilst most commentators forecast continued growth in the coming years it’s worth noting that we’re unlikely to see a rise to the stratospheric rises we saw in the pre-2007 housing market. Most estimates predict a slowdown from the levels of growth seen in the last five years, indeed when one considers that property prices have climbed some 104% on average in the capital since 2005 (even taking into account a large recession shaped depression), this seems a fairly logical conclusion to reach.

As ever I’m indebted to a housing price index, this edition is courtesy of the Reed & Rains England & Wales House Price Index for a more eloquent and complete picture please do check out the full report here : https://www.reedsrains.co.uk/uploads/asset_file/LSL-Acad-EW-HPI-News-Release-October-15-Adrian-Gill.pdf

Recent figures released by Lloyds Bank, reveal the number of property transactions with a value in excess of £1m to be 11% down in the first half of 2015. According to The Guardian the figures released in late October show a marked decrease from 6,303 in the same period (January to July) in 2014 to 5,599 this year. London in particular has taken a nosedive with the number of properties changing hands for more than £1m down by 15%. This is the first slump of its kind since 2012, so are we seeing a slowdown in the mercurial rise of property prices in London, and frankly a return to something more sensible?

In short, no. While reasons for the downturn in 2015 have ranged from uncertainty as to a red or blue dawn on 8th May, to the increase in stamp duty in December 2014, most authorities on the subject see this as little more than a blip on the ascent. Indeed according to Lloyd’s Halifax House Pricing Index prices in general, in the three months preceding September this year, increased by 8.6% from the same period in 2014. Furthermore these prices represented a 2% increase from the preceding quarter.

So hardly a slump to rival 2007 then, the most plausible explanation for the downturn in the numbers of properties selling for over £1m is actually quite simple. The increase in stamp duty for properties at the top end of the market may have actually contributed to a drop in asking prices. The practice of sellers paying the stamp duty for their perspective buyers by offering around 10% off the asking price (roughly the same as stamp duty liability) is becoming more prevalent in the ‘prime’ property market. A particularly high profile example of this being a seller of a property with the one

Hyde Park development offering to foot the stamp duty bill as part of the sale (as reported in the Standard http://www.standard.co.uk/news/london/owner-of-londons-most-expensive-property- offers-to-pay-9-million-stamp-duty-to-sell-luxury-flat-a2945256.html ). Whether this is widespread enough to have directly caused such a sharp decrease in super-six figure properties being sold is doubtful, but it remains the most convincing reason when taken in conjunction with the uncertainty of an election year.

What does this mean in the long term for London property prices? Simply put, we’re likely to see a resumption of service as usual in 2016. The recently published issue of London agent Savills residential property focus, maintains that whilst stamp duty will probably having a short term chilling effect on prime market prices, growth for the next five years will be relatively steady and could and prices could increase by as much as 21.5% by 2020. So if you were hoping to pick up a bargain basement flat in Kensington between now and next decade think again, Hartlepool however…..

For those particularly enamoured of statistics all those cited can be found either in Savills excellent research quarterly (http://www.savills.co.uk/research_articles/141280/193270-0 ) or The Lloyds Bank Halifax House Pricing Index (http://www.lloydsbankinggroup.com/media/economic- insight/halifax-house-price-index/), the latter comes with a health disclaimer as it’s very easy to get lost for hours on there.

The 6^th of October saw a CJEU ruling which has potentially far reaching ramifications for conveyancers and property search professionals across England and Wales. In what may prove a seminal decision the CJEU in East Sussex v Information Commissioner held that contrary to the challenge, local authorities are not precluded under EU law from charging overheads attributable to staffing costs when responding to individual requests for environmental data. On the face of it this appears a relatively simple decision but in a slightly depressing resumption of service as usual, further examination reveals that the CJEU has once again been asked a simple question and stopped short of answering definitively (more on which later). Whilst this decision arguably raises more questions than it resolves, the real question for conveyancing professionals is are we likely to see a spike in the fees being charged for data by local authorities?

Before attempting to answer the self-imposed hypothesis a little context to the decision is needed.  The ability of Local authorities to charge for the provision of property search information is a contentious one; naturally where you sit on the divide tends to directly correlate to whether you work in land charges or for a law firm or property search provider. The ‘public data should be free at source versus should the taxpayer foot the bill for what are essentially private matters’ debate is a long and circular one which this writer does not have the will to embark on so soon after Halloween festivities but its existence is an important factor in why the question was put to the CJEU in the first place. Historically it was thought that the governance of any charges imposed by local authorities came from the Local Authorities Charges for Property Searches Regulations 2008 (CPSR , which permit local authorities to recover the staffing, maintenance and overhead costs of making such information available. There has in recent years however been a growing awareness that the body of data requested for property searches is in the most part environmental in nature. This would appear to mean (and indeed this is the line most local authorities have taken) that the imposition of charges is in fact governed by regulation 8 of the Environmental Information Regulations 2004. Regulation 8 implements Article 5 of Directive 2003/4/EC allowing ‘reasonable’ charges for the provision of environmental information.

In the phrase ‘reasonable’ lies the problem, with many councils (such as East Sussex in the subject case) deeming this to allow local authorities to charge for the upkeep and maintenance of the data or registers used by private search companies. This was the position challenged by search provider PSG, eventually referred to the CJEU through an appeal to a decision made by the Information Commissioner against charges imposed by East Sussex in the Upper Tribunal.  In East Sussex the plaintiff applied for answers to the standard questions on the law society approved CON29R form, the local authority then mistakenly applied a fixed charge for the provision of this data, taking into account staff costs, overhead costs and the costs of maintaining relevant information systems, something which the CPSR permitted.  EIR Regulation 8 EIR implementing Article 5 of Directive 2003/4/EC however holds that no charge may be implemented for permitting access to public registers or requests to view the information in situ.

It was the apparent misapplication of this regulation that East Sussex centred on, to be fair to the CJEU on the question of just what public bodies could recoup in charges it was prima facie relatively clear.  It stipulated that any charges must rely to the supply of information and that the ‘supply’ must be something above and beyond the costs of maintaining the register or list of environmental data. At  [33]-[38] the charges encompass “not only postal and photocopying costs but also the costs attributable to the time spent by the staff of the public authority concerned on answering an individual request for information, which includes the time spent on searching for the information and putting it in the form required. Such costs do not arise from the establishment and maintenance of registers and lists of environmental information held and facilities for the examination of that information“.  Whilst the court did not give a definitive answer on what would constitute a reasonable charge in these circumstances it did at least submit that at [44] costs of £1-£4.50 per question were unlikely to contravene the reasonable requirement. It must be submitted however that a failure to clearly define the upper limits of what is a reasonable cost for staff time, postage and photocopying, leaves this open to interpretation and the inevitable fresh round of disputes this brings. Indeed the application of case  C-217/97 Commission v Germany [1999], in stating that any charge must be reasonable as not to deter anyone wishing to exercise their right of access to publicly held environmental information feels too wide, to sufficiently clarify the debate.

One can’t help but feel that with East Sussex a golden opportunity to clarify the issue has been missed, in terms of the wider debate it’s a bit of a non-decision. That councils should be able to charge for staff time, is something very few within the industry wilfully disagree with.  It is the potential for misapplication of this right which has historically sparked debate and will continue to do so. What is to stop local authorities reallocating the costs previously charged for system maintenance to ‘staff time’? Coupled with this the framework for challenging erroneous costs is expensive and convoluted, with any challenger needing to rely upon a long trek up the court ladder before the local authorities’ actions can be judicially reviewed.

To answer the original hypothesis, the outlook is a mixed one for conveyancing professionals. Whilst EIR is not about to be torn up anytime soon and still remains an important tool for those wishing to access publicly held environmental data, the position lacks clarity. The test for ‘reasonableness’ in costs, leaves the current system as open to abuse as it was pre East Sussex, with this is mind it is likely that PSG are to be the first of many search companies starting the long trek up the legal ladder.