Market Insight - March 2016
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Focus - Budget
Housing policies announced in the budget continued the government’s push towards increasing homeownership & reducing the attractiveness of property has an investment.
The chancellor confirmed that the additional 3% Stamp Duty will apply to everyone buying a second home, it was previously thought that large landlords bulk purchasing homes would be exempt.
Capital Gains Tax was also cut on all investment except residential property to encourage more investment in other assets rather than rental properties.
The chancellor also announced the new Lifetime ISA, starting in 2017, to help new buyers save a deposit faster. Buyers can save up to £4000 each year in the ISA and receive a 25% bonus from the government. We estimate that this would mean single buyers will be able to save a deposit 3 years faster nationally, and 19 years faster in London.
Economy – Brexit
The EU referendum in June has already begun to have some impact on the property market. Uncertainty about the vote played a part in weakening the pound making property in the UK cheaper in overseas currency, around 5% cheaper than at the start of the year.
But domestically the impact depends highly on the outcome of the ref. Prior to the ref, there’ll be a slowdown in activity in the market as many wait to see the outcome. If we vote to remain, activity should bounce back to the norm but a vote to leave opens the market to even more uncertainty as negotiations begin to remove the UK from the EU. The longer those negotiations take, the more uncertain and slower activity in the market will be.
Lettings – New Build Premium
New build homes can rent out for up to 20% more than comparable older homes. As renting becomes more of the norm, there looks to be a market for higher quality homes.
However, this has not always been the case. Between 2005-2007, new build homes were actually cheaper to rent than older homes as a result of a glut in supply of homes meaning tenants were better able to compare homes and negotiate cheaper rents successfully.
Sales – International Buyers & Sellers
2015 saw the proportion of foreign buyers in the UK housing market drop by 3%. This is mainly due to less activity from Russians & Chinese buyers.
Weaker economic growth in these countries, saw their currencies weaken relative to the pound making homes more expensive for them.
The higher cost as also caused a shift in their buying behaviours. Typically, their focus have been on prime central London homes but 2015 saw them increase activity in the relatively cheaper areas in the capital while buying less in prime central London.