Prices are still rising, but at a slower pace than they have done in recent years. According to Rightmove, asking prices were up by 1% – their lowest rise for the month of October since 2010.
The issues of stretched affordability and the uncertainty caused by Brexit are well documented. However, a new factor is emerging and that is the fallout from the Government’s attempts to tilt the market in favour of first time buyers rather than landlords.
Average prices are being dragged down by the price of their typical, smaller target properties – one and two bedroom homes – which fell by 0.1% last month.
Miles Shipside, Rightmove director and housing market analyst comments:
“With the government using the tax system to try and help first-time buyers while deterring out-of-favour landlords, prices in this sector have been subdued as intended.”
While stamp duty has been increased for landlords, it has been reduced for first time buyers and when that is added to the reduction in mortgage interest relief for landlords, their appetite for investing in the sector has fallen markedly.
BTL mortgage approvals were down 14% over the last 12 months but, at the same time, there has been an increase in FTB activity, with mortgage approvals rising by 1%. Clearly, that’s not enough to rebalance demand. Shipside, though, describes this as good news for FTBs, providing them with,
“An autumn opportunity to negotiate a favourable deal.”
It also means smaller properties are tending to linger longer on the market than other property types – the average time to sell increasing from 55 to 58 days.
In other news, the budget proved disappointing for the housing market, with the Chancellor tinkering around the edges rather than tackling some of the bigger issues, such as stamp duty reform and the shrinking supply of rental properties. The main changes are:
1) Abolishing stamp duty for joint purchases for first time buyers up to an increased limit of £500,000.
2) A £675m fund for converting empty shops into offices and homes, as well as proposing to ease any associated planning restrictions.
3) A two year extension to Help to Buy scheme.
4) A £500m increase in the Housing Infrastructure Fund which lends money to local authorities for building new homes and a lifting of the Local Authority cap on borrowing to build.
5) From 2020, Lettings relief will only apply where the owner of the property is in shared occupancy with the tenant, leading to a considerable Capital Gains Tax hit for many landlords when they sell up.
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