It may have been 2014 when George Osborne introduced an array of “new” property taxes but it is only now that these taxes are really starting to hit home.
UK economic growth fell from 0.7% in the final three months of 2016 to a disappointing 0.3% in the first three months of 2017. The buying and selling of property is an integral part of the UK economy and the figure for the first three months of 2017 reflects reduced property transaction numbers. So, what else is happening UK property market and should we be concerned?
KNOCK-ON EFFECT OF PROPERTY TRANSACTIONS
Many people fail to appreciate but for every property bought there could be an array of knock-on effects to the UK economy in the shape of new furniture, appliances, garden equipment not to mention the array of charges to solicitors and estate agents. So, it stands to reason that if property transaction numbers are down then retail activity will also be hit as well as the solicitor and estate agent sectors.
This all comes at a time when UK property prices have fallen for the second month running making the last 12 months one of the weakest periods for the UK property market in nearly 4 years. It is difficult to say whether this is the start of a new trend or perhaps a blip but constant concerns expressed about Brexit do seem to be impacting investor confidence.
PROPERTY STAMP DUTY
One telling factor about the current state of the UK property market is the fact that transaction numbers involving properties where stamp duty was payable fell by 5% in the first three months of 2017 compared to the same period in 2016. This equates to a staggering 195,000 properties although perhaps more worrying are the developments at the higher end of the UK property market.
For homes worth in excess of £500,000 we saw a massive 14% reduction in transaction numbers in the first three months of 2017 compared to the same period in 2016. This in itself equates to 22,600 properties and when you bear in mind the amount of stamp duty each property would have attracted, this is a significant loss of revenue for HMRC. The fact that the shortfall was made up in the short term by the second homes/buy to let stamp duty increase introduced by George Osborne is perhaps nothing more than papering over the short-term cracks.
It would be extremely dangerous to take three months figures and automatically assume that this is the start of a new trend in the UK property market. We have seen bouts of weakness over the years, we have seen disappointing months but on the whole the UK property market continues to creep higher. There are obvious concerns about Brexit, let’s face it nobody quite knows what might or might not happen, but in reality the UK property market has held up very well since last year’s Brexit vote.
Quite what will happen in the short to medium term remains to be seen but as we mentioned in one of our recent articles there are signs that the London property market is starting to bottom out.