Uncertainty grows as the impact of Stamp Duty changes, the EU referendum and devolved elections take their toll on the UK housing market.
- Short-term confidence in market flattens following winter’s buy-to-let rush.
- Survey respondents say uncertainty is fuelled by stamp duty changes, a weaker pound, Brexit and devolved elections.
- Rate of house price inflation is slowing with indicators pointing to more modest house price gains.
House prices fall further in London than elsewhere
These factors have been most strongly felt in central London, where 38% more respondents expected to see house prices fall over the next three months.
Across the UK, while expectations around the number of new house sales peaked following the Chancellor’s Autumn Statement, this trend has reversed with 2% more respondents expecting to see the number of sales fall rather than rise over the coming months. Confidence around house price inflation has also dampened with 17% of respondents (net balance) expecting to see prices rise over the next three months, compared to 44% (net balance) in December.
However, the longer-term outlook suggests that prices will still be expected to rise by more than 4% each year for the next five years across England and Wales, with prices in London projected to grow by a broadly similar amount rising by 3% each year over the same period.
Survey respondents cited Stamp Duty changes, the EU referendum and the forthcoming elections as the main catalysts driving the market slow down.
Despite, the increased rates of Stamp Duty Tax, now expected to be paid by prospective landlords, rent inflation — while expected to increase — is not predicted to rise any faster than it has in previous months. Although over the next five years respondents continue to anticipate rents will increase by an average of 4.5% per annum, there is no indication yet that tax increases are being passed on to the tenant. The expected rate of rent of inflation has remained constant for the past year at around 3%.
RICS Chief Economist, Simon Rubinsohn says “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. However, all indications suggest that whatever the outcome of the forthcoming elections and referendum, in the long-term, the imbalance between demand and supply will still exert a strong influence on the market, with house prices expected to rise by close to 25% over the next five years.”
Download and view the latest survey from RICS here.