Property News Round Up April 2016
This month we take a look at property sales and price trends, the extension of the Help to Buy Scheme in 2016, the supplementary Land and Buildings Transaction Tax (LBTT) charge for buy-to-let investors and second-home buyers, the possible effect of the EU Referendum on house prices and also the likelihood of interest rates rising in the near future.
Property Sales Remain Comparatively Strong
Property sales activity has remained very strong early in 2016.
The latest figures released by ESPC show that the number of homes sold in East Central Scotland between January 2016 and March 2016 increased by 2.9% compared to the same period the year before. However, the number of properties coming to the market in that same period decreased by 3.6%. This means that proportionately more properties sold in the past three months when compared with the year before.
The same report also revealed that the average selling time for properties in East Central Scotland is 39.9% faster when compared with the same three month period the previous year, having decreased from 69 days to 41 days.
Reduction in Properties Coming to Market Strengthens Seller’s Market
The latest ESPC figures reveal that the number of new properties coming to the market between January 2016 and March 2016 decreased by 3.6% compared with the same period a year ago.
There is no doubt that this year has seen a cooling of the market when it comes to property owners wanting to get their property onto the market for sale, mainly fuelled by sellers struggling to find a property to buy, and this is something that we have definitely seen at MOV8 during this period.
With a less crowded market place, the properties that are coming to market are in even higher demand. The increased competition for these properties is likely to be contributing to the increase in properties achieving, or exceeding, their asking prices. At MOV8, between January 2016 and March 2016, 87% of the properties we sold achieved a selling price at least equal to their asking price, with 77% achieving a sale price in excess of their asking price.
House Price Trends
In a break with the trend experienced throughout 2015, average property selling prices have decreased in the early part of 2016 when compared to 2015, with an annual decrease reported by ESPC of 10.9% in Edinburgh during the period from January 2016 to March 2016. This places the average selling price within Edinburgh during that period at £221,622, according to the latest figures released by the ESPC. The average selling price across the whole of East Central Scotland, between January 2016 and March 2016, decreased by 10.5% in comparison with the same period the previous year. As we mentioned last month, it is worth keeping in mind when looking at year-on-year changes, that between January and March 2015 there was an influx of higher value properties coming on to the market to take advantage of the then current tax regime, before Stamp Duty was replaced by Land and Building Transaction Tax (LBTT). This led to a temporary inflation in average property sale prices across East Central Scotland.
While the overall selling price decreased, there are sections of the market where prices are continuing to rise. For example, selling prices of one bedroom flats in the Leith Walk area of Edinburgh and two bedroom flats in the Newington area increased by 16.3%.
Caution, as always, must be exercised when looking at these sorts of statistics as the types and sizes of one and two-bedroom flats do vary and it is possible that there has been an increase in the proportion of sales of larger one and two-bedroom flats, for example, in these areas. Nevertheless, these statistics make very positive reading for anyone who is thinking of selling a property of this type in these areas.
Elections and the UK’s EU Referendum
With the referendum on the UK’s membership of the EU taking place on 23 June 2016, the Royal Institute of Chartered Surveyors warned that the uncertainty surrounding the referendum could take its toll on the property market. Simon Rubinsohn, chief economist at RICS, said: ‘As expected, the buy-to-let rush has now run its course, and as a natural result, the market is starting to slow. But there are other significant factors that are currently weakening short term confidence in the UK property market. Elections inevitably bring with them periods of uncertainty in the market, and our figures would suggest that next May’s devolved elections are no exception. Likewise, the EU referendum, is likely to be an influencer in terms of the damper outlook for London in particular.’
Conversely, if the ‘out’ supporters are to be believed and the UK, freed from EU regulations, attracted more inward investment instead of less, the likely effect would be that the property market would benefit.
We will comment further on this as the referendum comes closer, but we do not anticipate that the referendum will have a significant impact upon the majority of the Scottish property market.
Help to Buy Scheme Extended
Starting in March 2016 the Scottish Government began to accept applications for the latest ‘Help to Buy’ scheme. The three year scheme is designed to help thousands of households on lower incomes to purchase a new build property.
In addition, this financial year there are two additional Help to Buy home ownership schemes funded by the Scottish Government. The ‘Scottish Government Help to Buy (Scotland) Home Ownership Scheme’ will be made available to approximately 3,000 households over the year, with about £80 million equity support available. An additional £80 million will be available through the Open Market Shared Equity Scheme (OMSE) to help eligible first time buyers on lower incomes, an estimated 2,000, on to the property ladder.
For more information about the Help to Buy scheme and to find out if it might help you, just give our Conveyancing Department a call and one of our experts will be able to guide you through this.
Land and Building Transaction Tax (LBTT) Supplement for Buy-to-Let
The Scottish Government, on 16 December 2015, announced a change in Land and Building Transaction Tax (LBTT) for Buy-to-Let investors and people buying a second home.
Scotland’s Finance Secretary, John Swinney, announced that there will be an additional supplement of 3% of the purchase price of the property, on top of the existing LBTT that would be charged for non-buy to let investors and people who are not buying a second home. This new tax supplement on LBTT applies to anyone purchasing an additional property for £40,000 or more.
This means that properties that would generally be exempt from LBTT, due to their purchase price being under £145,000, will now be subject to the new tax of 3% of the total purchase price for these categories of buyers.
At MOV8 we saw a sharp rise in the number of property purchases under £150,000 in the run up to the change, and feedback from our negotiators and financial advisers suggests that many investors brought the Date of Entry for their purchases forward to achieve a ‘settlement date’ before 1 April 2016 in order to avoid this supplementary tax. This caused some very late nights in our Conveyancing Department!
The longer term effects of the LBTT changes on the Scottish property market are of course yet to be seen and we will report further on this in the coming weeks and months.
For more information check out our article on how the changes to LBTT may be bad news for both regular purchasers and property investors here.
Interest Rates Remain Unchanged
This month, the Bank of England’s Monetary Policy Committee (MPC) voted, unanimously in favour of keeping the Bank Rate (commonly referred to as ‘The Bank of England Base Rate’) at 0.5%. This rate has now stood at this historically low level for seven years as the Bank has tried to encourage consumer spending to stimulate economic activity.
The prevailing sentiment from independent economic research companies such as Capital Economics seems to be that an interest rate rise could happen by the end of this year, with predictions that inflation will surprise and spur the MPC into action before the end of 2016, in contrast to the expectations of those in the financial markets that interest rates could maintain their historic low until at least 2019.
It remains to be seen which of the experts are right, but the longer that interest rates and therefore mortgage rates remain at historically low levels, the longer the housing market will benefit from increased affordability of mortgage finance, and therefore of housing, for property buyers in the UK.
As ever, if you’re thinking of buying or selling a property or if you have any other questions about the contents of this month’s news round-up, please do feel free to get in touch with our property experts today on 0345 646 0208 or by emailing [email protected] and one of our team will be delighted to help you.