Even though the economic fundamentals are far from normal, the impact of the Brexit vote has been a soft landing for the property market – a point reinforced by the Nationwide’s surprisingly robust Q3 figures. Average prices across the UK rose at a faster rate during the three months after the vote than they did in the three months before it. Latest data from the Royal Institution of Chartered Surveyors has also, for the second consecutive month, recorded an increase in new buyer enquiries and the volume of agreed property sales amongst its members.
Notwithstanding the above, it is premature to talk of a post-Brexit boost. Price rises in the wake of the vote have been assisted by a temporary injection of pent-up demand – as buyers who sat on the fence in the run-up to the referendum are now getting off it, recognising that market uncertainty creates buying opportunities and the cost of rental accommodation is rapidly rising in many parts of the UK.
Further reassured by historically low interest rates, many buyers are showing strong intent – even if the lack of market clarity is proving disconcerting. Crucially however, sellers have battened down the hatches rather than abandoned ship, and low levels of supply are clearly continuing to have an effect on underpinning values.
Despite now being over 100 days on from the vote, the dust has yet to fully settle. The market has shown resilience, but it’s too soon to talk of a rebound.
Call to re-direct the stamp
The new Chancellor is coming under pressure from all parts of the residential property sector to review the Stamp Duty Land Tax (SDLT) changes introduced by his predecessor, George Osborne. The changes are attributed to exacerbating a stalling in the prime market and also causing a surge in asking prices in the first time buyer sector. Rightmove reported last month that average asking prices of properties with two or fewer bedrooms increased by £6,000. With average salaries at £26,500 according to the Office for National Statistics and current low levels of wage inflation, many are asking how can first time buyers hope to keep up?
In light of the problems faced at the foot of the market, Yorkshire Building Society has proposed switching the SDLT burden from the purchaser to the seller. They argue that this would make it easier for first time buyers and be fairer, as the seller is the one who has usually made a substantial profit, which they can realise tax free if it is their primary home. Whilst there is a clear logic to the proposal, this would only work in a boom cycle and could place those individuals who have purchased recently in a negative position, given the SDLT that they would have already paid.
Despite the level of property transactions being reported as 20% down year on year, it would appear that there are no corresponding fiscal pressures on the Chancellor that would prompt a change. Homes costing more than £1 million still accounted for a third of the total £7.3 billion SDLT paid last year. They contributed £2.6 billion of the overall amount collected, which reflected a 19% increase in revenue from the prime market, despite the drop in transaction levels. However, 46% of the total SDLT raised was in London, so a continued slowdown in the prime London market may yet have a detrimental impact on SDLT receipts.
Is Airbnb driving up London rents?
Online peer-to-peer short term letting website Airbnb seems to be an unexpected beneficiary of the tax changes being imposed on buy-to-let landlords. It is reported that there are now more than 20,000 entire properties listed on their site in London, which represents a 24% rise in just four months. Not only does this pose a commercial threat to hotel and serviced apartment providers, but it is also adding to the strain on an under-stocked private rental sector, as a large proportion of these properties would have previously been available for long-term rental.
In light of the above, changes are afoot, with London councils making owners apply for planning permission for change of use if their property is used for short-term lets more than 90 days per year. However, it remains to be seen whether London and other UK cities will follow the lead of New York and Berlin, where there is a ban on owners letting out their entire property for short term rentals.
Despite ongoing levels of political and economic uncertainty, there is clear evidence that a number of buyers and sellers are adapting to living in an increasingly volatile world and are progressing their property plans irrespectively.
In the weeks ahead, factors such as the Autumn Statement, the US election result and foreign exchange markets are all likely to individually and collectively impact market sentiment. For buyers looking to own property for the long term, the months ahead may well present a further ‘window of opportunity’ and impetus to take action.