Recent developments in the UK residential property market

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Many people were surprised when the UK budget was announced and there was little in the way of change for the UK property market. We have the now familiar promise of further new builds in years to come but there were no tax changes, no new taxes and no reductions in the ever-growing tax burden. Perhaps we should be relieved that they were no increases in property related taxes but they have increased significantly over the last few years.

Stamp duty

Some optimists were suggesting that the 3% additional tax on second homes and investment properties would be reduced. These hopes were well wide of the mark with not even a mention of this additional tax despite the fact recent statistics show it raises less than the previous property tax system. Many have suspected for some time that recent property tax rises have been aimed at currying favour with voters at the expense of property investors. Recent comments from the government have done nothing to allay these fears.

Property prices

The Nationwide House Price index shows an annual rise in house prices of 4.5% which is in the range of 3% to 6% which has been prevalent for the last two years. The regional variation is extremely mixed with the East of England performing best and Scotland at the other end of the spectrum. The February RICS Residential survey also contained some mixed news with concerns about the next three months but increased confidence about the next 12 months.

Sales activity

The pivotal London market is showing signs of a slowdown with asking prices down by 0.4% year on year. While this is the weakest asking price figure since 2011 it is perhaps to be expected in these confusing and uncertain times. This trend is further supported with news that the average London property is now taking 71 days to sell as opposed to just 58 a year ago. In general property price sale volumes have been slowly increasing across the UK since the Brexit vote last year but there are signs of a weakening in momentum.

Mortgage rates

Despite the fact that UK inflation has moved ahead of the target rate this has not impacted the mortgage market where competition is growing. An average borrower with a 25% deposit will be presented with a three-year fixed rate of 1.7% or a five-year fixed rate of 2.2% which compares to the average fixed loan rate of 2.7%. There are concerns in some quarters that the increase in competition amongst mortgage providers could move us back towards the dark days when more risky loans were approved. However, this is unlikely.

The future

The fact there was very little said about the UK property market in the latest budget reflects the current position. There are concerns about Brexit, UK base rates remain at record lows and there is still demand for UK property despite this uncertainty. Theresa May is expected to invoke Article 50 next week which will fire the starting gun for the U.K.’s eventual divorce from the European Union. The next two years will be full of rumour and counter rumour and in reality nobody really knows how this will pan out.

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