The director of two major agencies says George Osborne’s stamp duty surcharge and stock at an “historically low level” will force up house prices in some areas this winter.
Adrian Gill, director of Reeds Rains and Your Move, says that history shows buyers do rush to take advantage of favourable tax regimes - and so it will be with the stamp duty surcharge, which comes into effect in April.
“In Scotland after the Land and Buildings Transaction Tax was announced there was a surge in the sales of high end properties to beat the deadline. England and Wales may now feel the same forces, as there will be a growth in demand from both first time buyers with extra financial support and buy to let landlords hoping to invest before the tax changes come into force” says Gill.
“While the Chancellor has planned to increase the number of houses being built, none of these will be completed in the next few months. As the number of houses on the market is at an historically low level, those rushing for the April deadline will be fighting for a decreasing number of properties. So we could see a spike in both house prices and sales over the normally frosty winter period” he predicts.
He says the most obvious example of the surge will be in second home areas.
“For example, this could be most obvious in Salcombe, Devon. The town has the highest percentage of second homes in England. In Salcombe, the average price paid for a home in the last year was £532,000. A second home buyer here would need to find an extra £15,960. With such a significant hurdle after the tax comes into force, anyone who wants to buy a home in the area will be rushing to buy before April 2016” anticipates Gill.
He says that in London, the maximum price of homes which can be bought with the Help to Buy ISA may not be as beneficial as intended. “Currently, the upper limit of £450,000 could only buy the average house in twelve boroughs. Even in these areas, prices are rising annually by an average of 12.5 per cent, so London buyers will have to be quick if they are to make use of schemes like the Help to Buy ISA” says Gill.
Meanwhile the latest Reeds Rains and Your Move price index shows that house price growth slowed in November, during which most transactions took place prior to the Chancellor’s stamp duty announcement.
Annual prices across England and Wales have risen 6.0 per cent, say the agencies, indicating a full-year increase of £16,446, equivalent to £45 each day. However, the level of growth in November dipped to 0.6 per cent, down from 0.9 per cent a month earlier.