Property market sales volumes in 20 of the largest cities in the UK fell by 2% over the last 12 months, yet prices continued to rise by an average of 10.2%.
Areas which have typically been some of the key drivers for property market demand, namely the Capital and the East of England, have seen transaction numbers fall greatly. London has seen a 7% fall, while Cambridge has seen sales fall by 20%. These cities, together with other high value-high growth cities, have seen demand for properties slightly tail off over the last few years, and the new tax changes may aggravate this existing trend. The growing preference towards rental properties over ownership may also be fuelling this decrease.
Now, with the incoming tax change soon to affect buy-to-let property investors, there is a new surge in housing demand. These investors are seeking to increase their portfolio before the additional 3% stamp duty charge comes into effect on buy-to-let and second homes from April 1st.
Mark Hayward, NAEA managing director, suggested that “our findings this month reflect what we are all seeing across the market which is that landlords are trying to complete on sales ahead of the changes to stamp duty on additional homes in April.”
It seems that the buy-to-let property investment surge could be fuelling a short-term increase in demand when the market itself seems to be plateauing in the longer term. Furthermore, the uncertainty surrounding the potential EU Brexit could further reduce demand for properties. Studies show that political uncertainty can have a large influence on property demand – the Scottish referendum resulted in 10% fewer transactions and slower house price growth relative to England.
“Businesses operating in housing face risk and uncertainty which will have to be managed and monitored carefully…”
Richard Donnell, Insight Director at Hometrack, stated that “‘After a three year upturn in housing market activity and house prices the outlook for the property market appears increasingly tied up with policy impacts and the potential outcome of the referendum rather than the operation of market forces. Businesses operating in housing face risk and uncertainty which will have to be managed and monitored carefully.”
It is interesting, and perhaps slightly worrying, that the buy-to-let market has become particularly vulnerable to external factors over the past years – largely due to political decisions by the UK government. Arthur recommends that property investors seek to curtail risk by using the Arthur app to optimise and consolidate current property portfolios, so additional focus can be integrated with growth and expansion.
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