Happy New 'Yera'
Tony Jamieson of Clarke Gammon Wellers offers some thoughts on the property year ahead.
Welcome to 2016 and a new era in property. It promises to be an eventful-packed year. The way has already been prepared for a change in April when higher stamp duty rates are applied to properties bought for buy-to-let or second home purposes. So expect a busy time for the next few months as buyers rush to complete purchases before the axe falls. Already buy-to-let purchases are near their pre-crisis levels and the Chancellor may well tighten up lending criteria to stave off any potential problems down the line - 2015 saw buy-to-let borrowing at £38 billion compared with £45.7 billion in 2007. Mr Osborne will further affect landlords as from April as when they will also lose higher-rate tax relief on mortgage interest payments.
And what is happening with the ripple effect – the radiating waves of consequence that the London property market has on housing elsewhere in the UK? London now seems more disconnected than ever from the rest of Britain, as prices have spiraled from highly expensive to largely unaffordable over the past few years. And don’t think for a moment that the unaffordable tag does not affect the super- and even uber-rich. It does. Prime London properties are seeing a significant negative adjustment as higher taxation, the slump in worldwide oil prices and the Chinese economic slowdown have had a severe impact on the clamour for property. Perhaps the circus has left town as buyers now consider New York to be the new darling of high-end residential property investment.
So what about those who do not want to buy a holiday home or investment property – those people who merely want a roof over their heads? Well 2016 may be eventful-packed for them also including a possible lift in house prices of between five and eight per cent. But it will be a slow and frustrating start. 2015 saw ten straight months of selling instruction decline. The stock of unsold properties is currently the lowest ever recorded. The law of supply and demand suggests this should have a positive effect on prices in many parts of the UK. Like global warming, the UK housing market is open to conflicting interpretation. Is it the lack of new homes which is causing the log jam or is it that people have just stopped moving for the time being and are staying put, perhaps busy building extensions or digging basements to provide more space instead of buying somewhere larger? For now it is hard to know the true position.
It is also difficult to work out what any long-anticipated interest rate increases will do to the property market should they be introduced, or what might happen if the UK heads for the Brexit following the European referendum. Even if there is a vote to remain in the European Union the uncertainty may spook the property market for a few months - if the last general election and the Scottish referendum are anything to go by. Heads will also be turned by the Olympics in Brazil in the summer, and all the while political and economic upheaval in the rest of Europe and further afield will create further uncertainty.
So 2016 will certainly not be without its challenges in the property market. But we are used to handling challenges for our clients. Our advice, as always, is purchase carefully within your means - and this includes your means if mortgage interest rates rise. This year will not be a perfect one for property speculation without the greatest prudence and care. But it will be a good year for settling into a home that provides safety, warmth and shelter for you and your family in these uncertain times. Whatever is going on in the world any year is a good year to do that.