Following the announcement of the change to stamp duty for those who owned second homes a rush to finalise all deals before the 1st April 2016 was expected. For those who completed before 25th November 2015, they will not have to pay the higher rate of stamp duty even if the property is not ready by 1st April 2016. For those who completed after 25th November 2016, they will have to pay the surcharge of 3% if the homes are not ready by 1st April 2016.
The introduction of the additional stamp duty surcharge will mean that the UK property market will take another hit as interest in the property is likely to reduce from 1st April 2016.
Demand from second home owners has already been affected by the stamp duty increase throughout England and Wales but during November there was an increase in property prices of 3.7% which made up part of the annual 13.4% increase. However, November is a notoriously quiet month which means that a 3.7% increase is considerable. The figures during December will be interesting as some of the pressure on the market could have been eased as a result of the 25th November cut-off date. A kind of “False Market” has been created following the introduction of the new stamp duty surcharge and there will be demand during the early months of 2016 but this could end quickly once the stamp duty is brought in.
Currently, first time buyers are thin on the ground but for those who are in a position to purchase will face competition from those who are looking to invest in buy-to-let properties. This is all happening at a time when the UK base rates are heavily scrutinised following the increase in the rates in the US. A number of experts have already made it clear that they believe there will be an increase in UK base rates before the end of 2016 and the belief is that it will occur sooner than many think. This will have an impact on the UK mortgage market which is why a number of first time buyers are working hard to finalise deals as quickly as possible.
From the end of March, the demand from buy-to-let investors is expected to reduce and this could lead to a situation where mortgage rates will increase gradually in readiness for the increase in the base rate. This will lead to investors trying to complete their deals in the early months of 2016.
The UK property market is moving relatively freely at the moment but this surely cannot continue as 2016 gets underway. The UK economy is working well at the moment and so is the property market but there are problems occurring overseas that can have a knock-on effect in the UK. The economy in Europe has hinted that the future of the Euro could be stable but there is still a lot of focus on it but the UK EU referendum is only around the corner.
There is a belief that 2016 could be a difficult year for the UK property market but which way it will go is a mystery.
For more information about property investment in the UK, please contact Hopwood House.