The changes to stamp duty and the UK’s exit from the European Union are expected to be the two most influential factors on the housing market in 2017. The introduction of stamp duty raised the upfront cost of buying a home at the top of the market. The introduction of a higher rate of duty on second homes could now compound the matter. There was already plenty of uncertainty in the market from the start of the year due to the upcoming referendum and the unexpected result will ensure that the uncertainty carries on into the New Year.
According to the house price index, the price of homes across the UK was up by an average of 6.9% and the average cost of a home was £217000. This slow growth had been seen from the start of the year by the main indices and only the shortage of houses in the market brought about the growth that was witnessed according to the Royal Institution of Chartered Surveyors (Rics). Rics noted that there were fewer houses coming into the market even as buyer numbers went up after the referendum.
What may be more worrying is that according to Rics’ forecast, the growth will fall to 3% in 2017. Countrywide, the largest estate agency group in the UK, has an even gloomier forecast as the predict house prices will fall by 1% due to uncertainty brought on by Brexit and rising inflation. According to the group’s chief economist, many people will not be able to afford the houses due to rising cost of essentials and even those who can afford to buy houses will question whether they should wait.
The beginning of the year showed little activity at the top of the property market and things have been pretty much the same since then. The recent stamp duty changes coupled with Brexit have brought down the sales of homes priced at £1m and above. However, even as some developers report weakened sales, some estate agents have reported more interest from overseas investors due to the weakened pound.
Prices have been cut in many expensive developments and many newbuilds are being reconfigured to be smaller and cheaper. Central London’s prime market will be ending the year 9% down according to Savills and the figure could be 5% in other upmarket areas of the city. Savills also states that there is unlikely to be any growth at the centre of the city in 2017.
Landlords will be facing stricter affordability checks to qualify for buy to let mortgages in 2017 and the withdrawal of tax relief on mortgage interest will also start. This will likely lead to a reduction in activity in the area.
There have been more properties entering the market in the recent past and by November, the average rent had fallen by 0.7%, the biggest fall in 6 years. Savills, however, predicts that rents will jump back up in 2017 and they expect a 3% increase in London and a 2.5% increase across the UK due to growth in earnings among other factors.