The national economy is still forecast to grow at above 2% per annum over the next five years, and at 74.1% employment is at its highest level since records began. Wages and inflation have increased. On the downside, the UK’s trade deficit and public sector debt continue to rise and are the most concerning aspects of the economy. The Bank of England has maintained interest rates at 0.5% and the majority of forecasters are now not predicting a rise until early 2017.

The 3% increase in Stamp Duty Land Tax (SDLT) for additional home buyers came into force earlier this month, increasing transaction costs for buyers purchasing additional homes, for example second homes or buy-to-let properties. As with previous SDLT reforms, once the markets have adjusted to take account of the new transaction costs, we expect activity levels and price growth to stabilise.

Historically, the first quarter of the year has been synonymous with a fall in activity levels. Despite the seasonal trend, the magnitude of the reduction in 2016 would suggest market activity has fallen even more significantly. However, the Strutt & Parker Prime Central London (PCL) offices have experienced a more buoyant first quarter than the general market figures would imply.

Whilst there are underlying risks to market performance in the medium/long term, the PCL market remains a ‘safe-haven’ for overseas investors and the performance of the UK economy is better than many advanced economies. Therefore, we expect growth of around 21% over the next five years.