Uncertainty grows as the impact of Stamp Duty changes, the EU referendum and devolved elections take their toll on the UK housing market.
At a glance:
- Short-term confidence in market flattens following winter’s buy-to-let rush.
- Survey respondents say uncertainty is fuelled by stamp duty changes, a weaker pound, Brexit and devolved elections.
- Rate of house price inflation is slowing with indicators pointing to more modest house price gains.
House prices fall further in London than elsewhere
These factors have been most strongly felt in central London, where 38% more respondents expected to see house prices fall over the next three months.
Across the UK, while expectations around the number of new house sales peaked following the Chancellor’s Autumn Statement, this trend has reversed with 2% more respondents expecting to see the number of sales fall rather than rise over the coming months. Confidence around house price inflation has also dampened with 17% of respondents (net balance) expecting to see prices rise over the next three months, compared to 44% (net balance) in December.
However, the longer-term outlook suggests that prices will still be expected to rise by more than 4% each year for the next five years across England and Wales, with prices in London projected to grow by a broadly similar amount rising by 3% each year over the same period.
Survey respondents cited Stamp Duty changes, the EU referendum and the forthcoming elections as the main catalysts driving the market slow down.
Despite, the increased rates of Stamp Duty Tax, now expected to be paid by prospective landlords, rent inflation — while expected to increase — is not predicted to rise any faster than it has in previous months. Although over the next five years respondents continue to anticipate rents will increase by an average of 4.5% per annum, there is no indication yet that tax increases are being passed on to the tenant. The expected rate of rent of inflation has remained constant for the past year at around 3%.