Last Updated on 27.5.21 by Gorvins
The residential property market is having a rather turbulent time of late after incorporating new changes and waiting for an unresolved future to reveal itself. For this reason, it has been difficult to predict the next steps in the world of property, however, more surveyors are expecting house prices to fall in the next three months compared to those who predict an increase, according to the latest residential market report from the Royal Institute of Chartered Surveyors (RICS).
If a price decrease does happen, it will be the first time since 2012 that such an event has occurred. Over the past two decades, the national average house value has increased by a huge 251% and more recently prices have been rising steadily. Over the past year the UK average purchase price has increased by 9% (Halifax House Price Index) and in May alone they jumped up by 0.6% – twice the expected rate – but experts now are predicting a short-term downturn.
Why are experts predicting a downturn?
Although prices rose in May, demand from buyers fell at the fastest rate in 8 years, according to Chief Economist at RICS Simon Rubinsohn. The short-term drop predicted is most likely due to two main reasons: Buy-to-Let changes and the EU Brexit debate.
It’s been around two months since the Stamp Duty Tax changes came into force, which penalises landlords and owners of second property by adding on an extra 3% to the stamp duty. For this reason, most buy-to-let landlords got their purchases in and did their business earlier in the year to avoid this extra cost. It was thought that first-time buyers would plug the gap and take a larger share of the market after these changes but this hasn’t come to light.
Although some landlords have exited the market, first-time buyers have not been able to take advantage because of record-high house prices. Have wages increased 251% in the last 20 years? Silly question. With a record number of people also renting, 4.5 million people, it all adds together to mean that first-time buyers can’t save a large enough deposit to be able to buy a property due to being trapped in this ‘rental rat race’.
Looking at the longer-term it’s the lack of supply that has caused prices to escalate. The Help to Buy Scheme from the government promised to build 200,000 homes a year but they are way off this target. According to my rough calculations, 200,000 a year equates to about 530 houses a day or 22-23 an hour. This number was managed after the Second World War but seems to be more difficult to achieve these days.
You can’t move at the minute without hearing about the Brexit/Bremain referendum – it’s doing the rounds on TV, newspapers, round the dinner table, in work offices and on the street. No doubt at all that the referendum is a huge decision for the future of the UK but the uncertainty of whether we stay in or out is having a knock-on effect on the housing market. With warnings of price crashes and rising interest rates should we leave the EU, many potential buyers and investors are biding their time to see what happens, which is often a common occurrence before any major vote or referendum.
The decline in house prices is only expected to be a short-term occurrence because of the natural slow-down following the buy-to-let rush and the forthcoming EU referendum. As such the slump is unlikely to result in the emergence of affordable housing in the long-term. Once the future becomes more certain prices are likely to start rising again.
Our Residential Property team here at Gorvins are the perfect people to make your house purchase as smooth as can be. Whether you are buying your first home, a landlord looking to expand your portfolio or a looking to sell your house and downsize, we can help you with your legal conveyancing needs.