Market Slows As Uncertainty Grows
Now that the new stamp duty legislation is in place, the rush from investors to purchase buy-to-let properties has all but diminished and the market seems to be on a go-slow with builders and buyers uncertain of what the future holds for the region’s housing market. Here, Fran Mulhall, Regional Operations Manager at North East property specialists GFW Letting, explains why.
“From late last year right up until the start of spring, there was no doubt that the North East housing market was more buoyant than it previously had been as investors looked to buy properties before the Government increased stamp duty on buy-to-let purchases by 3%.
Given how strong activity has been, it’s no surprise that the average asking price of homes coming onto the market rose to a new high, increasing nationally by 1.3% in March to an average of £307,033 as landlords raced to buy properties ahead of the new legislation. Rightmove believes the stamp duty hike helped to ‘ignite an onward chain reaction’ with landlords buying homes right at the bottom of the ladder, enabling former owners to move on and up the ladder. However, this was at the height of the buy-to-let rush and now that this has pretty much died off, as RICS recently highlighted, buyer demand has reduced since March.
So why is this the case? As it wasn’t just buy-to-let investors that were helping to make the housing market strong – latest figures show that first-time buyer activity in March jumped 15% compared to March 2015 and 41% compared to February 2016. It seems the reason behind this downturn is due to increased uncertainty about what the lending market will look like, fuelled by a weaker pound and the possibility of a Brexit following the June referendum.
The looming threat of a Brexit in particular seems to be causing both housebuilders and buyers to be cautious before making any bold moves in the market. As a result of both economic and political uncertainties, house prices may well go down over the next few months, until the UK vote to stay in or exit the EU has been decided. Indeed, this might explain why North East house prices have fallen by 4% in April, wiping £7,000 off the value of an average home.
For now, it’s a waiting game for all those involved in the housing market – be that builders, buyers, investors and agents alike. With so much uncertainty around a Brexit and the hotly discussed impact a Brexit could have on the UK housing market, it’s quite apparent that this is affecting market performance, with many holding their breath to see what unfolds both economically and politically before making any key decisions.”
If you want to discuss the state of the play within the current North East housing market or any of the issues I’ve raised here, feel free to drop me a line on firstname.lastname@example.org or call 0191 284 7171.