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Property Slump Feared After Late Buy-to-Let Surge

Industry Insight April 4th, 2016
Property Slump Feared After Late Buy-to-Let Surge

Sales soared by 71% as buyers sought to complete property deals before the deadline. Now, estate agents fear a post-deadline slump.

Estate Agents are now predicting a property slump demand after the surge that occurred during the first quarter of 2016 as buyers sought to complete deals before the implementation of the new stamp duty surcharge.

Many buy-to-let investors aimed to finish their deals ahead of the introduction of the 3% surcharge on additional homes, leading to a 71% surge in sales with a cumulative value of £17bn in the two weeks prior to the deadline in comparison to 2015 sales.

In March, buy-to-let investors and developers made up 55% of the market, compared with 35% in March 2015 – a massive difference of 20%. The total saving made by completing purchases before the deadline has been estimated to around £275 million.

Now, with the stamp duty surcharge in place, it is believed that there will be a strong slowdown in demand for additional properties. One expert wrote  an article expressing their belief that  investors should wait until 2019, which is when they predict that most investors will have unmanageable levels of buy-to-let debt, causing  a mass sell-up and, subsequently, lower prices and higher yields.

It is also believed that the surcharge may cause a drop in prices equivalent to the cost. Apparently, negotiations that account for the stamp duty surcharge have already become known to Estate Agents, with one buying agent stating that “any buyer with any guile will leave the seller and their agent with the impression that this is their second home and could be costing an extra 3%”

As the market levels out, the next few months will be much more of a cooldown. Buy-to-let investors should spend these months reducing their costs so that they are also reducing their risks if any changes occur to the market. Moreover, they are also increasing their total profit this way, which will help fund the purchase for the next property.

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