It is fair to say that 2016 was a year full of surprises. Donald Trump’s triumph in the American Presidential race and the UK’s decision to leave the EU were perhaps the biggest shocks of all. However, most people are now keen to assess what impact these monumental events will have on their own personal lives in the foreseeable future. One such area is property prices. Many are looking at the value of their existing homes and considering whether now is the time to upsize, downsize or simply stay put. For others it is question of getting onto the property ladder or, in the case of buy-to-let investors, withdrawing from the market altogether. Here we consider possible market trends for the next 12 months.
Certainly there can be no argument that we are in are in an unprecedented period of change. However, this now may be considered the new norm – a world ever moving and evolving. Regardless of whatever the wider picture may show, basic human needs such as housing still need to be met.
The Government is expected to produce a White Paper in January which promises to set out “radical” plans to boost housing supply in England and Wales. It is expected to set out measures aimed at boosting housing supply to bring the Government towards its target of a million homes over the life of this Parliament.
Key sector figures and bodies are expecting changes to the Starter Homes policy which may include (but are not limited to) a 20% threshold for Starter Homes in all new developments. This particular issue has been met with sharp criticism from developers, local authorities and charities who have warned that this may result in a reduction of conventional affordable housing and actually distort markets.
An exemption from the Starter Homes policy for Build to Rent developers, allowing them to provide discount market rented housing instead, has also purportedly been discussed.
Measures may be put in place to force builders to increase build-out rates to combat perceived “landbanking” (where land is held for extended periods without development), a proposal which has generated concern from the sector.
It any event, the publication of the White Paper will hopefully show the Government’s commitment to meet the housing needs of the UK.
The Government is also facing pressure to reduce Stamp Duty Land Tax rates.
Stamp duty changes introduced two years ago have already started to have an impact at the top of the market, where the upfront cost of buying a home has increased substantially. Estate agents have reported falling interest from those looking to buy properties with values in excess of £1m. This has been coupled with reduced demand from overseas buyers and developers reporting falling sales. As a result there have been price cuts in some of the most expensive developments and also some reconfiguring of newbuilds so that apartments are smaller and cheaper. This means that more houses and flats are being built within reduced prices, which hopefully mean that developers are able to sell them more readily.
A further change, being the introduction of a higher rate of duty on second homes introduced in April 2016, is still having a lasting impact on the market.
Sales boomed in the run-up to the introduction of the higher rate. Figures from HM Revenue & Customs showed that in March 2016, 162,000 properties changed hands, a rise of 77% from the same period for 2015. This was substantiated by data from the Council of Mortgage Lenders (CML) which showed 29,300 mortgages were advanced to landlords that month, more than treble the number in March 2015.
However, the additional charges have made investor buyers and those with property portfolios question the future of their business and assets. To buy more properties would be at a higher cost than before the stamp duty changes. However, without growth, will their business stagnate? Some have already started to formulate their “exit strategy” from the market and are taking advice on the most efficient way of disposing of all properties they own. This however comes with a benefit to those looking to buy a property within this sector of the market. Many of the properties released from such portfolios are ideally priced for first time buyers or those looking to downsize. This, along with the proposals contained in the Government’s White Paper, may provide the opportunity for first time buyers to get their foot on the property ladder.
Yet despite the dearth of buyers for higher value properties and limited opportunities for those with existing property portfolios, the official house price index (published in October 2016) shows that across the UK prices were up by 6.9% year-on-year. The average price of a property is now £217,000.
The Nationwide Building Society have predicted house prices to rise further by 3% over the next 12 months. Additionally the Royal Institution of Chartered Surveyors (RICS), believes East Anglia, the North West and the West Midlands will record higher gains than the national average. Again positive news for those who already own their own home.
Certainly there is no lack of demand in the property market. RICS has in fact reported a shortage of homes for sale over the course of several months throughout 2016. Therefore this suggests problems with the supply chain and the number of properties being placed on the open market for sale.
In conclusion, it appears that the balance of the 2017 property market is tipping more towards those looking to purchase their first home and those (without a property portfolio) who are moving within the existing market.
As buying or selling a house is an extremely important step in anyone’s life, it is important to ensure that the right legal processes are followed in order that you can complete at the earliest opportunity and with as few problems as possible. Here at Guy Williams Layton we have a dedicated team of staff who specialise in residential property matters and who have many years of experience dealing with both buyers and sellers. If you would like to obtain a quotation for our professional conveyancing services please call 0151 342 1831 or 0151 236 7171 and ask for a member of the Property Team who will be more than happy to help with your query.
If you would like more information about how this might affect you, please contact Mark William Broughton