The (almost) Unstoppable UK Property Market
In March, the property market appeared to be booming, with sales peaking at 171,220 following a very positive year that led Barclays to believe that we were in a bubble proportionately worse than the US crisis in 2007.
After this peak, house sales took a sudden dramatic fall to 74,900 in April and improved a little in May at 84,300. Compare these to figures to last year with April at 86,970 and 97,820 in May 2016 and you might think that there is a bit of a housing crisis.
Changes to UK property tax laws have been to blame for this sudden dip in house sales. In April, stamp duty increased by 3% for those looking to purchase a second property and many were preparing for the changes to mortgage interest rate relief. These particular investors may have wanted to offload their properties, but many others wanted to take advantage before the change, resulting in the 96,320 difference between March and April.
Not only is this said to have caused the boom in house sales, but it is also said to have caused a housing shortage. In the aftermath of the stamp duty changes Rightmove have seen 5.3% fewer houses come to market than last year.
Is this due to the tax changes or is this people being cautious around Brexit? Only time will tell.
However, one thing we do know is that buyer spirits are not being dampened by tax changes nor Brexit, as house prices have reached record levels once again. Between May and June house prices have increased a further 0.8% to reach the UK average of £310,471, which is 5.5% higher than in June 2015.
House prices have increased nation-wide with only London seeing a small contraction in asking prices at 0.2%. Wales and the South-West of England Average annual house price growth has now outpaced London at a massive 4.8%. Even with house prices at such a high level the reported sell time is at 57 days, which is the lowest since 2010.
The real effect of the property tax changes is yet to be known, but we can clearly see that the UK property market remains lively. Experts are forecasting a short term fall in house prices and if we do leave the EU tomorrow anything could happen. If we do leave the EU and we see a dramatic fall in house prices, there will be many buyers in the current market left in a very unfortunate position.
Yet, the real cause for concern is that the government changed the property tax laws with a vision of freeing up more affordable homes for first time buyers. In reality all the policy seems to have achieved is a shortage of housing and all-time high house prices. Might we see a U-turn sometime in the future?