The UK’s housing market has experienced a slowdown in recent months. According to the experts, the situation is likely to continue until the end of the year. In fact, some property owners are waiting up to ten months to sell their properties. Some of them have had to lower their asking prices by thousands of Pounds. Likewise, most real estate agents are expecting a significant drop in the number of homes to be sold in 2017. The only time the UK housing market experienced such low activity was during the infamous financial crisis.
There are two major issues that have had a significant impact on the current situation of the housing market in the UK: the Brexit vote and stamp duty. The changes in Stamp duty, which were introduced in 2014, are slowly influencing the high-end housing market. The changes in the stamp duty threshold for buy-to-let properties and second home buyers have also contributed to the current state of affairs. Even though there was an unexpected increase in the number of home buyers after the Brexit vote, the overall number of transactions carried out on a monthly basis, have declined recently. Besides these, there have been other changes in the housing market.
UK’s housing prices are expected to keep pace with the monthly inflation rates. The Royal Institution of Chartered Surveyors (RICS), expects the house prices to increase by three percent this year. So, after taking into consideration the inflation rate, the nominal growth is insignificant. The current average house price is about ten times the average income of most UK residents. The majority of consumers will most likely give priority to other essential items such as food and fuel over home ownership. Despite this situation, shortage of homes in the UK, especially single family homes, persist.
Following the decline of the Sterling Pound, some overseas investors have shown increasing interest in the high-end market. However, this has not translated into an increase in sales.
Recently, there has been a rise in the buy-to-let market, especially after the stamp duty changes. But, the impending withdrawal of tax relief on mortgage interest seems to make the situation harder for the landlords. Generally, rent is expected to increase by 2 – 3 percent, across the UK, in 2017. Most experts believed that the foreign investors are most likely to be attracted by the rental yield. So, the UK’s rental market could see an increase of short-term investors. What is driving this appetite is the insignificant increase in income growth, thus, limiting the ability to secure mortgages.
Another issue that has characterized the UK housing market in the recent past, is the low standards of new homes. Developers, who are racing to meet the demand in the market, are the main cause of this problem. Some of the recent homeowners have complained of substandard homes. In fact, some of them had to pay for further renovations for their newly acquired homes. Only time will tell if the UK housing market can recover in the near future.