New Year starts on a high for property prices

Posted: 14/01/2016

As the new year commences, estate agents are getting ready as second home owners scramble as they hurry to beat the increase on stamp duty across Wales and England.

The full details of the suggested 3% hike will be revealed in the March Budget but currently the legislation is still in the consultation phase.

However, you will be exempt from paying the extra tax if you exchanged on a second before the 25th November even if the property will not be completed until after the 1st April. The only other way to dodge paying the extra tax will be to purchase and exchange before the 1st of April.

According to the chief executive of Haart estate agents, Paul Smith, this is the reason for the steep increase in property prices since Chancellor George Osborne’s Autumn Statement.

Paul Smith stated “House prices rose 13.4% annually and 3.7% on the month to break records again in November,”

“This is the steepest monthly and annual increase on record and follows a surge in registrations from buy-to-let investors since the Autumn Statement in anticipation of the 3% stamp duty surcharge which is effective from April 1. This could mean the stamp duty payable on a property worth £275,000 could rise from £3,750 to £12,000.”

He continued “Although first-time-buyer house prices have remained relatively stable, up just 1.1% in the last month, I expect these to shoot up over the coming months as first-time buyers face fierce competition from buy-to-let investors. While first-timers may face a tough couple of months, once the stamp duty changes come into effect in April, demand from buy-to-let investors is likely to recede.”

Paul Smith believes this will lead property prices to stabilise at this point.

Similarly, chief economist at Nationwide, Robert Gardner, said “UK house prices increased by 0.8% last month, with the annual pace of house price growth picking up to 4.5%from 3.7% in November. Overall, we expect UK house prices to rise by 3 to 6% over the next 12 months.”

James Wyatt of Baton Wyatt estate agents in Surrey believes the mixture of the higher stamp duty and the expected increase in interest rates will lead to “a bumpy ride” in 2016.

He continued to describe the 3% increase on stamp duty for buy-to-let properties as “another government stab in the back” for people planning to invest for their retirement.

He added “Watch very strong sales up to £300,000 in the first quarter then listen to the tumbleweed.”

After the announcement by the United States’ Federal Reserve that they are going to raise interest rates to around 0.25 to 0.5%, a rise in UK interest rates is predicted before the end of 2016.

“Despite its inevitability, the increase will spook just about everyone with mortgages,” says Wyatt.

But thankfully there is some good news as he says “10% deposit mortgages are back so 2016 will see a strong first-time-buyer market in most areas. Major towns and cities outside London may see prices increase by 10%.”

Assetz For Investors advises that investors looking to clinch a buy-to-let property before 1st April deadline should consider buying in the North of England, as their Chief executive Stuart Law says: “For buy-to-let investors looking to minimise the impact of the new tax on mortgage interest and also the 3% additional stamp duty levy on second homes and investment property, Northern cities such as Liverpool, Manchester and Leeds offer excellent prospects for house price growth and net market yields of around 5-6%.

 “According to current data, the average property price in Liverpool still comes in at less than £100,000. For investors taking heed of the government’s messages about London and over leveraged buy-to-let, the North will become one of the safe-haven buy-to-let locations of 2016 for cash-rich investors seeking to minimise their tax costs.”

Kirsty Rogers, Pali Ltd

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