Get a move on if you want a second home
By Jo Eccles
Q: What should we expect to see happening in the London property market in 2016?
A: With the New Year comes a habit of looking ahead. In terms of where that will lead the London property market, I expect 2016 to be an interesting journey.
This first quarter is likely to be a very busy one and we saw the beginnings of this towards the end of December. This largely stems from the Chancellor’s 2015 Autumn Statement where he announced that buy-to-let investors and second home owners will be subject to an additional 3% of stamp duty on purchases which complete after 1st April 2016. This has caused a rush of investors and second home owners to step up their search efforts. We have seen a significant increase in our client numbers as buyers are anxious to find and complete on a property in time. Buyers are also keen to gain an advantage against those that are competing with them to snap up the same properties and complete in time.
However, after 1st April, I think we will see transaction levels fall as the rush will be over and the market will be digesting the new transaction fees which will have just kicked in. The higher end of the market is already experiencing fewer sales and this will further add to it. The extra transaction costs are significant; if you’re buying a property for £1m then the extra stamp duty payable will be £30,000. So, for anyone buying an investment property, this will really squeeze their cash deposit if they’re borrowing.
I think chain sales and purchases will be on the rise too. This is where you tie in the sale of your existing home with your new home, completing on both simultaneously. At the moment, if you complete on your new purchase before you sell your existing home, the new stamp duty policy implies that you will need to pay the extra stamp duty on your new purchase, but you can claim it back if you sell your original home within 18 months. That’s all good and well, but you need to find the cash for the extra 3% stamp duty you’ve had to pay in the interim. Managing chains can be hugely complex and the risk of a sale or purchase falling apart is much greater, so this may further impact transaction numbers.
Overall the general sentiment is that property prices are expected to rise by approximately 3% over the year and we’re not expecting any more surprise taxes from the government, so it should be a fairly steady year after the first quarter rush. People’s lives continue and the property market will always be driven by this.
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