The housing market in the UK has been influenced by two major factors during 2016 – The EU referendum and the changes in stamp duty. It is almost three years since the changes in stamp duty came into force. However, the after effects are still working, and the cost of buying property has shot up. To compound the issue, the higher rate of duty imposed on second homes that followed close on the heels of the stamp duty changes has had a profound effect.
The Brexit poll created a lot of confusion and ambiguity in the property market and the ultimate result was certainly a rude shock, the effects of which are still being felt well into 2017. The Office for National Statistics re-launched the official house price index in June 2016, which replaces the existing indices published by the Land Registry and Office for National Statistics. The figures published last indicate that there is a 6.9% increase in property prices, which is the lowest recorded figure since 2015.
The start of the year has not been very encouraging for property owners as the indices indicate sluggish growth. The artificial growth witnessed is due to a shortage of houses put up for sale, according to the reports published by The Royal Institution of Chartered Surveyors (RIcs). While the number of buyers has increased substantially since Brexit, the number of properties being put up for sale has dwindled.
In June 2016, the rate of growth of property prices in the U.K. was very encouraging at 9.3%, though the same is disappointing at 6.9% in October, a sharp decline in just 3 odd months. Although RIcs predicted a 6% growth, which was substantiated by the figures quoted by ONS, the changes in the stamp duty seemed to have played the spoilsport. The effect that stamp duty changes have had on property prices has eclipsed the effect of Brexit. RIcs predicts even more dismal figures at 3% by the end of 2017.
To compound matters, inflation seems to be fuelling the fall in property prices, what with consumers struggling to make ends meet just for essentials like food and fuel. People are now thinking twice before investing in property. Even the luxury property market does not seem to be immune to the effects and has recorded a very sluggish growth. The sale of million pound homes has taken a bad hit due to changes in stamp duty, and Brexit too has had its own effect on people with money to spend.