April 1st is known as April Fool’s Day but it was no joke for those investors who were hoping to complete a purchase transaction and avoid the punitive 3% increase in stamp duty on second home purchases that has now come into effect.
With Rightmove reporting that average asking prices now exceed £300,000 nationally this stamp duty change would add around £9000 to the cost of purchase.
Fortunately most investors managed to complete their transactions in time with the help of conveyancers who undoubtedly worked long hours to ensure that their clients achieved their goals.
The Government introduced this additional levy to dampen down the growth of the buy to let sector and try and level the playing field for first time owner occupier buyers.
With this recent surge in investor buying activity we will now likely see a short term boost in the numbers of properties available to rent but we expect this to be taken up quickly and a more even balance between supply and demand to become the norm.
Buy to let investors will also be facing reducing levels of tax relief on mortgage interest over the next four years but, couple with the stamp duty changes, we expect this to get factored into the market as investors should be taking a long term view and the prognosis for both rental returns and capital growth remain very positive in comparison with other investments.
The next three months will undoubtedly see some uncertainty in the market as the rhetoric surrounding the European Referendum increases.
The decision whether to stay or leave Europe is a huge one and I doubt if there is anyone who can be completely sure as to what the right answer for the future is as the implications are so far reaching. There are clearly aspects to being in Europe which are beneficial but others that, if we take a purely nationalistic view, would be regarded as negative.
Once the outcome is known we may be better placed to forecast its effects on the market. Certainly if the status quo is maintained then we would expect market activity to remain strong. If the vote is to leave, whilst there will be no immediate impact, there may be a lengthy period of uncertainty whilst the ramifications of the decision are fully realised.
At the present time, we enter the traditionally active Spring market with things generally in good shape. Now is a a time when many people look to get on with their plans with the view of moving home in time to get into new school catchment intakes before September. Property also tends to look at its most attractive as gardens come into bloom and the sun hopefully shines!
Michael Johnson
