Property Trends to Look Out for During 2017: Part Two

Property Trends to Look Out for During 2017: Part Two
With Brexit throwing up more questions than answers, there has been much speculation as to what this exactly means for the property market. With other significant decisions yet to be made and negotiations with the EU yet to happen, it is unclear just how the market is going to change.

In the first article in this series, we looked at two property trends to keep an eye out for: dwindling home ownership amongst young people and the ongoing debate about greenfield construction around British towns and cities.

In this final part, we will look into new buy-to-let legislation and uncertainty around the pound.

Buy-to-let changes will affect landlords' profits

Buy-to-let tax relief changes set for 1 April 2017 will affect the profits of many landlords.

Following the decision made in the 2015 summer budget to cut mortgage interest tax relief for buy-to-let properties, from 1 April a phased reduction will be introduced, eventually capping interest relief at 20%.

This means that higher and additional rate taxpayers will no longer be able to claim 40% or 45% interest relief. Instead, restrictions will be introduced in phases as outlined below:

LPC tax changes

Around 400,000 landlords will be pushed into the higher tax bracket as a direct result of the changes, according to The National Landlords Association.

A recent YouGov survey of 925 mortgaged buy-to-let landlords revealed that many know about the changes, but aren't too worried about the short-term implications.

Instead of fretting, a majority said they were taking a long-term view of the deductions, with 80% saying they should be able to deal with the interest rate increase when it happens.

For those in the survey that said they wouldn't be able to manage, the increases could potentially close down opportunities for them. This is all on top of the additional 3% stamp duty on property purchases that landlords have had to pay since April 2016.

Uncertainty around the pound and house prices

Fears have arisen following the Brexit vote that the weaker pound will result in tumbling property prices across the country.

With the uncertainty whether the government will opt for a 'hard' or 'soft' Brexit - or what that even means - and negotiations still in their early stages, we probably still won't know what the full implications of the post-Brexit fallout will be for years to come.

This uncertainty has resulted in many fears and questions being thrown up by potential homeowners:
  • Just how far will prices rise?
  • How will mortgage rates change?
  • How will the recession affect repayments?
These questions could potentially put owners off the thought of buying their own property.

Staying in the present: according to Halifax, prices increased to 1.7% in December from 0.6% in November, with the three-month average of year-on-year price growth up from 6.5% compared to 6%. However, this could be a somewhat positive situation for landlords, while Martin Ellis, an economist at Halifax, said: "Yearly price growth was expected to slow to between 1-4 percent by the end of 2017."

Despite the weak pound, there is clearly momentum in the market with prices currently being propped up by the ongoing lack of supply across the country. 

Article provided by LPC Living