Good riddance! That’s what many landlords and property developers are probably saying about 2016. It has certainly been a rollercoaster ride for those in the property industry.
There seems to have been many a huge sledgehammer used to crack some very small nuts. But can new legislation really take the heat out of various sectors of the property market without affecting people’s livelihoods? And have the key changes to government policy had the impact that ministers had hoped for?
The stamp duty changes announced in April have taken effect, and from what we can see they have affected mainly larger London properties by slowing the rate of sales.
But in the auction room, other London property has been our best seller time and time again, making me think that the aim of the tax increase hasn’t quite worked in the way the then chancellor anticipated. Yes, some £3.1bn has been raised for the Treasury through this tax, but it seems to be affecting one sector a lot more than others.
A top rate of 12% stamp duty on sales over £1.5m – 15% if the purchaser is buying a second home – means the middle to top end of the London market has slowed, costing the Treasury huge sums in lost revenue. I guess you win some, lose some.
Property developers and landlords have been unperturbed, certainly in our auction room, when buying property guided at between, say, £100,000 and £800,000. Such a performance could serve to allay Brexit fears.
The social consequence of the tax increase is also starting to be felt, with reports of many private landlords either selling up, putting rents up to pay for the extra tax bill, or minimising its impact by putting their portfolios into a limited company. So again, maybe not the outcome expected.
The London market though is still slightly different to the rest of the UK, with a price-to-earnings ratio now at 14.2 times annual income. This basically means that the average property investor in the capital is looking for new ways to buy property, and auctions are in favour with many who have never used them before.
There is still some education to do here, so that vendors understand the difference between auctions and private treaty, but opting for the auction room is a growing trend and will continue in 2017.
For example, over recent auctions, the percentage of our London lots sold has been 100%, showing that for a certain property type and price range, auctions are gaining in popularity.
And it’s not just central London that is proving to be popular. House prices within the M25 surrounding London have increased significantly in recent years as people look to move further afield in order to afford a home, but prices here have risen more than those in the South East region as a whole. House prices in towns such as Rickmansworth, Hemel Hempstead and Barnet have seen growth of more than 550% since the M25 was built.
In 2017 we will see the Crossrail project having more of an impact on property prices and increasing demand from buyers and landlords for property near the new stations.
There will also be a continuing high demand for rental stock, with landlords using growing equity in existing portfolios to leverage finance for further properties as well as conversions and refurbishments.
In this regard, auctions remain an ideal place for developers to snap up rental property in all conditions and states of repair with a view to adding them to the undersupplied private rental sector.
And not just in London. We have seen property sales rise in most UK regions and the big cities have led the way.
The fallout from the Brexit vote may continue to put uncertainty on property values, and we could well see more people buying in syndicates – not only to reduce the cost of acquiring property but also to minimise the risk of fluctuations in the market.
So let’s see what the spring Budget holds, and hope there is a better understanding of the needs of the property sector and its importance to the economy and the livelihoods of us working in this sector.
Farewell, 2016! Never a dull moment, as they say. Let’s just hope the new year does not bring any more curve balls or sledgehammers to duck.
