Our look back at the property market in 2016
What’s happened with the London market this year?
We can’t get far into this article without mentioning Brexit. The word that’s been on everyone’s lips in 2016. It caused the value of the pound to drop, and this combined with low interest rates, has increased foreign investment, especially in London.
The uncertainty caused by Brexit has resulted in some vendors and buyers failing to commit to the sale or purchase of a property. Tax changes have also affected buyer activity, with many buyers choosing not to make decisions until a clearer image of what Brexit means for the property market emerges.
The sales market slowed in the wake of Brexit. This has contributed to a rise in properties being listed to rent, which in turn has helped tenants as they have more options when it comes to rental accommodation. More than ever, tenants are looking for quality accommodation, proactive letting agents, value for money and flexibility.
We’ve seen a rise in rental stock this year, though some of this may have been bought in the first quarter of the year ahead of the stamp duty rise in April. According to Rightmove, London has seen a 15% year on year increase in the supply of rental homes.
Despite the stamp duty increase, figures released in October show that this has failed to discourage landlords from investing in buy-to-let. Landlords are still enticed by good returns from a rental sector which remains strong.
What’s most affected landlords this year?
Tax changes and stamp duty increases have weighed heavily on the buy-to-let sector this year.
Landlords have been hit by a wave of measures introduced by the government in the last few years. Once such measure is the extra 3% stamp duty surcharge, which applies to buy-to-let investors and second home purchasers. This came into effect in April this year. As a result, there was fierce activity in the first quarter, as people moved quickly to reach completion by the end of March. After the higher threshold had come into affect, the buy-to-let market was down in the months following, but it has since started to pick up again.
The government is also planning to limit tax relief on mortgage interest payments. These changes to mortgage interest relief are to be phased in from April 2017. By 2020, landlords will no longer be able to deduct the cost of their mortgage interest from their rental income.
Government legislation and tax changes have left landlords worried about what measures the government could impose next. The new Chancellor’s Autumn Statement might announce a change to the stamp duty rate hikes to help landlords. Hammond, himself a former buy-to-let investor, might scrap or at least make changes to the measures imposed by the previous Chancellor, George Osborne. This includes the 10% wear and tear allowance, mortgage interest relief reductions and the stamp duty increase.
Our predictions for 2017 are positive, and despite stamp duty increases, a drop in the value of the pound and Brexit, the property market has shown resilience.
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