There have been two significant influences on the housing market in 2016: stamp duty and the EU referendum result.
Stamp duty changes introduced two years ago had already started to have an impact at the top of the market, where the upfront cost of buying a home had increased substantially. Another change, the introduction of a higher rate of duty on second homes, was introduced in April.
From the beginning of the year, the Brexit poll had triggered uncertainty in the market and the shock result ensured that the feeling will linger into 2017. Here is a round-up of the state of the British property market in 2016 and where it could be heading in 2017.
The official house price index, relaunched in June by the Office for National Statistics, looks at the prices paid for homes and is published a couple of months after the data is collected. The latest figures, for October, show that across the UK prices were up by 6.9% year-on-year – the lowest figure since the end of 2015. The average price was £217,000.
Figures from all of the main indices show growth has slowed since the start of the year. What growth there has been is a result a shortage of homes for sale, according to the Royal Institution of Chartered Surveyors (Rics). For several months it has reported a fall in the number of properties coming on to the market while buyer numbers have risen since the referendum.
Rics predicted 6% growth for the year, and the ONS figures are not far off. Simon Rubinsohn, chief economist at Rics, said 2016 had been “characterised by the stamp duty change” in April. “The stamp duty impact has been a much bigger factor in the profiles of activity over the year than the referendum.” For 2017, Ricshas forecast growth will fall by half, to 3%.
The UK’s largest estate agency group, Countrywide, has a gloomier outlook and has predicted a 1% fall in 2017, with Brexit-fuelled uncertainty and higher inflation fuelling the drop. Its chief economist, Fionnuala Earley, said consumers faced rising costs, particularly for essentials like food and fuel. “These sort of things will be happening slightly later than expected,” she said. “They will make it more difficult for people to afford homes and also may make some people think twice about whether it is a good time to buy.”
The top-end of the property market started the year sluggishly and carried on in the same way. Sales of homes above £1m have been dented by the changes to stamp duty brought in at the end of 2014, and uncertainty around the referendum, together with this year’s further stamp duty change, have not helped.