We’ve had the Budget, our gardens and the hedgerows are breaking into colour, the clocks have gone forward and the Easter holidays are upon us. The warmer weather is greeting what is traditionally a strong time of year for the property market and Spring is clearly in the air!
The first quarter of 2012 has surprised many with activity being generally more positive than anticipated and transaction levels strong.
We are all aware that the economic picture remains challenging and the Budget, as expected, saw the Government’s emphasis remain firmly on business growth and reducing the deficit.
The key announcements in the Budget that directly affect the property market were the introduction of a punitive 15% Stamp Duty Land Tax rate for those who acquire property purchases through corporate entities. This potential “tax loophole” whereby stamp duty was being avoided is being effectively closed but may actually affect some corporate acquirers who were not looking to profit from avoiding stamp duty. This may need some further attention but in reality, relates to a fairly small level of very expensive properties, largely in Central London.
Stamp Duty Land Tax has however been increased to 7% on all property purchases over £2 million and this will impact on a greater level of transactions and undoubtedly create a “negotiating hotspot” at around the £2 million figure in the same way as already exists at other Stamp Duty threshold points. At the time of the announcement it was estimated that some 2,000 properties were actively in the market or being sold across the UK at or above £2 million.
Pre budget the government had already launched its New Buy scheme (a rework of the previous First Start scheme) which enables first time buyers of new homes to secure a higher loan to value loan and therefore purchase with a reduced deposit. This is likely to be of limited impact on the market overall but will enable some new homes developers to increase their sales.
The Government has also signalled its intention to increase homeownership by revamping the Right to Buy scheme and provide larger discounts for long term tenants who wish to buy. This will undoubtedly assist many to move away from renting and into home ownership but will do nothing in the short term to increase volumes in the property market and will, by definition, unless the funds raised are reinvested in building more social housing, reduce still further the stock in this vital housing sector.
In the sales market, the situation in London and the South East remains buoyant and sensibly priced property is attracting good interest and firm sales. Prices achieved are, in fact, at higher levels than they were before the “credit crunch” and it is only the continuing tight lending criteria that is stopping the market returning to “normal” annual volume levels.
Mortgage interest rates have recently started to increase on variable rate products as lenders look to improve their margins and reflect increased inter-bank lending rates (LIBOR). The base rate has remained at 0.5% for over 3 years and looks set to continue at low levels. It is clearly advisable to take professional advice when considering a loan whether it be for buying, buy to let or re-mortgage purposes. Our mortgage advisers will be pleased to provide you with the information and choices to enable you to make an informed decision.
The private rental sector is also buoyant although there are some signs of “over-heating” as the ability and desire of tenants to pay ever increasing rental levels is being severely tested. Recent reports from Central London show a slight decline in rental value levels as concerns in the job market begin to have an effect.
April looks set to see the market continue in a positive vein and will also see the introduction of a new look Energy Performance Certificate (EPC).
The EPC has been a much maligned document largely due to not being understood. The new format will be clearer and easier to understand and will also encourage owners to make energy saving improvements through the “Green Deal” due to be introduced in October.
The Green Deal will provide owners with access to funding for insulation and energy saving improvements that will then be paid for over time through an increased electricity bill. This could, for example, enable landlords to improve properties with the cost being met by tenants.
Crucially, both owners and agents will be held responsible for providing the EPC at marketing stage with heavy fines for those not displaying and producing an EPC within 7 days of going to the market.
Finally, at Sansome & George we remain very positive about the outlook for the property market and our new Basingstoke office has made a busy and positive start. We see a strong and steady market for the foreseeable future with prices increasing slightly where supply is insufficient to meet demand.
As always, correct pricing coupled with great marketing are keys to a successful transaction and our experienced teams will be pleased to advise you on maximising the result in your own specific situation.
David Sansome
Managing Director
