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Market Update - December

Thursday, 3rd December 2015

Categories: Market Analysis

Author: Justin Burns

Not another turkey sandwich, let’s look for a property on the internet!

Research over recent years form the major property websites has shown that the period between Christmas and the New Year is the busiest for visitor traffic with significantly increased volumes of prospective buyers and tenants looking for property.

Whether this is due to a “New Year, new home” mentality, people realising that they need more space to accommodate all their presents or that, unfortunately, their current relationship won’t stand another year, is not entirely clear – it is probably a combination of these and other factors – but what is clear is that those whose properties are being shown on the market at this time, potentially benefit from exposure to a rush of fresh enquiries.

Whilst the market has slowed in recent weeks in terms of the volume of property coming to the market, demand remains strong. A slight shift in the supply and demand ratio will undoubtedly see the market move forward again in 2016.

Fears of interest rate increases have subsided and, whilst likely to increase at some point, with inflation currently in negative territory, this looks unlikely in the foreseeable future with many seeing no increase in 2016 the likely outcome.

New home building is increasing, albeit slowly, and the reductions to mortgage interest tax relief for buy to let investors won’t start to come into effect until 2017 (this will impact a little negatively on landlords but may help first time buyers compete more successfully for property).

The long road to national economic recovery looks set to continue slowly and, for those in employment, the vast majority are beginning to feel slightly better off than they have in the last few years.

Affordability is the key factor and, as house prices have risen, this has become more difficult for many. Interest rates may be low but lenders are being vigilant on their lending criteria and the ability to borrow sufficient funds to move can be hard.

Stamp duty changes introduced a year ago have helped anyone buying up to £937,500 but anyone buying above this level is paying a higher tax bill and the “top slice” of tax above 1.5 million is 12% of the purchase price (although the punitive “slab” approach of the previous stamp duty regime is now mitigated by the rates of tax only being payable on the slice of purchase price above each threshold).

The lettings market remains buoyant with investors still keen to expand their portfolios, confident in both the rental yield and capital growth. Demand from tenants also remains strong with job movers, those making a flexible lifestyle choice and those unable to obtain a mortgage (usually due to the need for a substantial deposit) seeking accommodation.

With interest rates low and demand remaining ahead of supply, the market looks set to be fairly stable in 2016 although as we move towards a referendum on Europe in 2017 we may see a little uncertainty creep into the market.