Spring Budget 2017: What to expect for the UK’s property market

News at Waterfords | 08/03/2017

Spring is in the air and that means it’s time for the much anticipated Budget. Chancellor Philip Hammond has announced that this Spring Budget has been the last of its kind and that all major announcements will form part of the Autumn Statement. So what about the property market? Disappointingly, nothing noteworthy was mentioned relating to the property market in the Spring Budget.

Waterfords Managing Director, Brendan Cox, talks about how Stamp Duty and new buy-to-let tax rules could form the perfect storm for the property market by discussing the following:

Stamp Duty reform: could sellers have foot the bill?

New buy-to-let tax rules for landlords still stand

Property market overview

Estate Agents want to see Stamp Duty reform

Changes to Stamp Duty has been a hot topic for discussion for some years. The newest Stamp Duty rule, an increase of 3%, has hit some UK markets hard. However, as house prices continue to slowly but steadily rise, even first time buyers are footing the bill of extra charges on anything more than £125,000. According to Halifax, the number of those paying stamp duty is the highest they’ve seen in ten years.

Chancellor, Philip Hammond, hasn’t implied any changes regarding the current Stamp Duty regulations. However, with interest dropping in London’s prime residential market, this will hopefully be revisited in the 2017 Autumn Statement. The lack of mention on something that has impacted the UK property market so predominantly in recent years, may be due to the Government focusing on preparations to kick off Brexit negotiations and might be reluctant to make any speculative decisions when it comes to Britain’s bricks and mortar.

Property experts were keeping their fingers crossed at the possibility of stamp duty reform by levying the charge on sellers rather than buyers. Waterfords Managing Director, Brendan Cox, states;

“Imposing the charge against sellers would have helped to reduce costs for first-time buyers, thus helping more people to get on the property ladder. This would have lead on to helping those moving up the property ladder, enabling them to move to a more suitable property and potentially freeing up smaller homes for first-time buyers, a huge help to the UK housing shortage. I, along with many other industry professionals hope that this will be reviewed in the future.”

Stamp Duty reform and Buy-to-let could come together in a perfect storm

Landlords will be disappointed to learn that there was no mention of the new Buy-to-let mortgage rules in the Spring Budget, meaning that the new rules will be coming into force in April without question. The phased introduction to the scheme which starts in April 2017 will see some landlord’s tax bills double or even triple with the scrapping of mortgage tax relief. At the moment, landlords can deduct mortgage interest and other finance-related costs from their rental income before calculating tax liability. But this interest relief is being cut from 100% to zero between 2017 and 2021.

The tax on rental and other income sources will be worked out and landlords will be granted a ‘tax credit’ worth 20% of the mortgage interest cost to offset against income tax. The beginning of the phase will be in April 2017 when it will drop from 100% to 75%. Landlords are evidently anxious about these new taxes so how will they manage with the higher rate of tax?

Brendan Cox comments: “It is a possibility that landlords will have to increase rents, further restricting the supply of affordable property for tenants. Unfortunately this could also have a negative effect on the residential sales market, making it harder for first-time buyers in rental accommodation to build a deposit and climb onto the property ladder. This combined with the extra Stamp Duty charges creates the perfect storm for a slowing housing market. First time buyers and buy-to-let investors may be in competition, but both live in taxing times.”

Every cloud has a silver lining

It’s not all doom and gloom for the UK’s property market. In fact there is evidence that the buy-to-let market is flourishing. With over 100 more deals available compared to the same period last year and the average fixed rate on buy-to-let falling over the last 12 months. Landlords can make considerable savings by switching to a new mortgage deal, reducing their monthly payments.

The UK economy has shown a much greater resilience to the Brexit vote than predicted. Despite the political uncertainty a slow but steady rise in house prices should continue throughout 2017, underpinned by the shortage of housing stock and low borrowing costs for buyers. Due to this there are encouraging signs of home-mover activity, with visits to Rightmove up 5% compared to the same time last year.

With buyer and tenant demand up and a continued shortage of housing in both the lettings and residential sales sector, now is an opportune time to sell or let your home with your multi-award-winning local estate agent for a desirable asking price.

If you are not thinking of moving, we are more than happy to offer a no obligation market appraisal or simply provide advice on local property market conditions and mortgage options.