The past 5 years have been good for the property market. Investors and property owners alike benefited from the rising costs and eager buyers. However, the year 2016 signalled a warning for the property market, especially since the announcement of Britain’s plans to exit the EU.
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We are now in 2017 and things are no better. Investors are less willing to make significant financial commitments in an uncertain property market following the Prime Minister’s recent announcement to trigger Article 50 on March 29.
Activating plans to leave the EU will likely to result in a flatline in the price of personal mortgages and other housing costs. Ever since the results of the election last June, the UK markets continue to fluctuate with experts predicting a slight downfall in the economy. No doubt, many changes have led to this point.
Recent changes in the property market
- Changes in tax
In addition to the EU referendum, the second biggest influencing factor in the housing market was the stamp duty. Two years ago, changes to the stamp duty was introduced by the Chancellor at the time George Osborne, in a bid to raise more funds for the sector. This means that anyone buying an additional property or home (worth £40,000 or more) will have to pay an extra 3% in Land tax. This affects second time homeowners, landlords and property investors.
In addition to the increased stamp duty, landlords were further hit with another government policy which will see the tax relief they usually get for finance costs restricted to basic rate of Income Tax. This law will take effect in April 2017, meaning the property market is set for a turbulent outcome in the next few weeks.
Due to the unfavourable conditions, people (especially second-time home buyers) are loathe to make property purchases at the moment. Logically, if being landlords will attract such high costs, they might be better off holding off for a while.
As the demand for property drops, it will affect the price negatively. This means the future of pricing in the UK market will be bleak in the coming months.Nonetheless, some optimistic property experts at RICS believe the effect is only temporary, and the markets will stabilise and pick up eventually.
Not all sour grapes
However, while landlords and property investors are the most hit by the turnout of events, a particular group of people appear to enjoying the situation.
First time home buyers are exempt from financial obligations and will most likely cash in on the advantage of low-priced homes. Already, the UK had been complaining about the rise of generation rent. Perhaps, the current turn of events in the property sector could see some tenants switching to buy their homes for the first time.