After The Gold Rush
At Samuel Wood & Company, we have been taking a look at the property market now the rush to avoid a higher stamp duty is over.
It happens after every major budget change where extra tax costs are involved when buying a home. There is a stampede to complete purchases before the tax axe falls. Most notable was when double tax relief (MIRAS - Mortgage Interest Relief At Source) was removed on mortgages for unmarried couples in August 1988. This resulted in an average of two years’ worth of transactions being squeezed into a twelve month period - and a sharp rise in house prices. Sadly it also heralded a slump in activity the following year with all the negative knock-on effects to allied areas of the economy. Governments should see these things coming but they never seem to.
We have just witnessed a mini-stampede from buyers of second and buy-to-let homes pushing through their purchases before the April 1st deadline when higher rates of Stamp Duty Land Tax (SDLT) were imposed - a hefty rise when one hadn’t really factored it in before the last budget or even if they had.
Of course everyone in the industry could have anticipated this rush to complete purchases. In this area at least tax avoidance doesn’t appear to have the stigma that many other areas of this now-frowned-upon activity have.
But now comes the aftershock. Once again we can predict the outcome. Those who were serious about buying will have finalised their purchases. That leaves those who were not so serious. This group will take a little time to take stock and get used to the extra cost of buying - while some will decide not to purchase at all. This will leave a vacuum in the market for some months.
Nature and the property market don’t like a vacuum so a number of things will happen. There will be fewer motivated buyers and certain asking prices will come under pressure because of the extra cost of purchase. But the best bit is that for the first time in years first-time buyers should have a window of opportunity when there may not be so much competition from cash and/or professional property buyers. Given the low interest rates this then is the perfect time to enter the market for those with a deposit and an in-principle mortgage in place.
Every cloud has a silver lining. After the last gold rush this is the time for first-time buyers to strike it rich
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Anthony Wood of Samuel Wood & Co goes beyond the hype and looks at what is really important in buying and selling a property this spring.
The property market is never static. But it is perhaps now at a unique juncture. It is hard to think of a time when the market was so politicised. Following on from last year's general election and the Scottish referendum in 2014 we now face the UK European referendum in June. No market likes uncertainty and on top of various recent tax changes - especially in the buy-to-let and second home sectors - these political events are certainly making some buyers and sellers wonder if they should wait for the dust to settle before moving.
But what if future events prevent the dust from settling? Perhaps after the referendum there will be something else to think about – a possible interest rate change, the US general election in November or some fresh global, economic or humanitarian crisis. The point is that our lives, although influenced by politicians, do not march to the drum of politics; they have their own rhythms - governed by personal events like leaving school or college, partnering or marriage, births, jobs, income changes, relocation, retirement, and - underlying it all - individual ambitions.
Some say there is never a perfect time to move home. But of course there is: it’s the time that is dictated by life. In or out of the European Union or despite what future events are in store we all have personal agendas that largely ignore national and international affairs as we seek to provide for our families and ourselves. We don’t move home in the national interest. We move home in our own interest - to fulfil our own ambitions. Despite what politicians may have us believe our own houses are rather more significant to us as individuals than either the Houses of Parliament in London or the European Commission in Brussels. So perhaps it’s best to forget politicians when it comes to moving home and listen instead to our hearts – and our financial advisors.
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Please contact Tara at Craven Arms on 01588 672728
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