As we move into one of the busiest times of the year for the sales market, the headlines, have been dominated by two issues – a slowdown in house price growth and an increasing clamour for stamp duty reform.
Rightmove’s index reveals that although asking prices for property coming onto the market rose by 2.0% in February, it was the smallest rise since February 2009 and considerably below the 5% average of the last 7 years.
Hometrack’s index showed city level house price growth slipped from 7.9% last year to 6.9% this year. The slowdown is particularly pronounced in London, which has fallen to eighth place in the growth table and is now considerably behind cities like Bristol (+9.5%), Oxford (+9.2%), Manchester (+8.3%) and Southampton (+8.0%).
However, prices are still growing in most areas of the country and nine out of ten owners remain confident house prices will go up or stay the same over the next twelve months (source: Clydesdale and Yorkshire Bank survey). Robert Gardner, Nationwide’s Chief Economist, said:
“A small rise in house prices of around 2% is more likely than a decline over the course of 2017, since low borrowing costs and the dearth of homes on the market will continue to support price.”
Rightmove Director Miles Shipside, adds:
“While the prices of goods in shops are rising at a faster rate, the pace of price rises in property coming to the market is slowing. They’re still 2.3% higher than a year ago, but perhaps we’re approaching the territory where many buyers are unable or unwilling to pay what sellers are asking, given the combination of rises in the cost of living, tighter lending criteria, and a dose of Brexit uncertainty.”
The net result is that, although spring should give it a boost, the market is becoming increasingly price sensitive. Research by Rightmove reveals that three quarters of the agents now report their local market as ‘price sensitive’ and that an asking price that is just a few percentage points too high will harm interest levels. The research also found that sellers are 40% more likely to sell if their property is priced correctly when first launched.
In addition to the uncertainty caused by Brexit, the high cost of stamp duty has also been blamed by many for the slowdown and the number of people calling for reforms has grown in recent months. It’s not just affecting the upper end of the market, where recent changes to the tax have reduced transactions of properties between £1-2million by 33% and by 75% over £10million.
The rising price of homes has also dragged ever more properties at the bottom end into the tax net. The current threshold for paying the tax was set in 2006 and, since then, house prices have risen by 35%. At the time, 47% of house purchases were stamp duty free. That figure has dropped to 26%, with 74% of first time buyers now paying the tax.
Many argue that by reducing the rates, the tax take would rise, as it would be offset by the increase in the number of transactions, which in turn would feed into the economy, as people tend to spend large amounts of money when moving home.
One or two have even called for the tax to be switched to the seller rather than the buyer, as it would be less of a barrier for both first-time buyers and people trading up.
However, much to the disappointment of the property industry, in this month’s Spring Budget, Philip Hammond, the Chancellor, failed to make any changes whatsoever in the sector.