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Looking to the future of the housing market

Thursday, February 4th, 2016

housing marketWhat does 2016 have in store for the housing market?

Already we are 2 month’s into 2016 and the year that promises a number of interesting developments in the property industry, particularly with the Bank of England likely to increase interest rates!

One thing that is certain to happen in England and Wales is from April, stamp duty rates are to be hiked up for anyone buying a home that is not their main residence. With a similar change set to happen in Scotland.

This spells out bad news for the buy to let market and landlords who may be put off buying altogether. So following the last few years in which mortgages have returned to normality the property market is set for a shake up.

This means it will be more expensive for second home buyers and buy to let landlords, and could deter some potential buyers altogether. Who would of imagined a Tory government would take such a stance on buy to let landlords – just the type of people who provided them a majority government less than a year ago. But this is what has transpired, not only will their stamp duty rates rise, but an erosion of some of their tax privileges is now in the pipeline for 2017 following the announcement in the Chancellor’s summer Budget.

Put simply, the government believes private landlords have crowded out home owners, especially those first-time buyers…..

landlordsWhat does this mean?

Current and would be landlords will now be taxed on turnover and not on profit; meaning that some will have to pay tax, even if they are making losses.  However, landlords that operate as companies, including pension funds and insurance companies will be exempt.

They will continue to be taxed on profit. This has seen Cherie Blair set to launch a legal battle against George Osborne’s plans, Blair the former Labour leader’s wife, is a landlord in her own right.

The Council of Mortgage Lenders (CML) forecasts that the number of new loans made to landlords will now fall sharply, from 116,000 in 2015 to just 90,000 in 2017.

It is almost seven years since the Bank of England slashed interest rates to a record low of just 0.5% designed to starve off financial Armageddon in the wake of the great banking crisis. Since then, many economists have forecast that raises are due, only to be wrong. So, will 2016 finally be the year?

As we know, most experts predict the first UK rate rises since July 2007 will happen this coming year, and by two increments of 0.25% each. The bank is aware that incomes are recovering and this may convince action. It is hoped that these income growths should help avoid a collective shudder going through if indeed they do indeed raise by 0.5%

mortgage ratesInteresting times ahead

So the last few years have seen the low Bank rate translated into historically very low mortgage rates, making even very large mortgages seem affordable.  This coupled with the litmus paper lit by the government’s help to buy schemes have allowed thousands of people, mostly first time buyers, access to owning a home when previously they might have been locked out.

It is hoped that the steady growth of the economy, rising employment and a continuation of the modest increases in incomes should stop sales or prices falling.

However, those people who want to buy to let properties are clearly going to be incentivised to complete before the March 31st deadline, which will see some quite strong growth in prices during the early months with prices falling post March 31st as the demand element is taken out of the market.

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