The key question about property which is on most lips during the year is whether house prices will rise or fall. However, there has been a number of changes to the property market, which are likely to have an impact on those considering buying or renting a home in 2016.
Stamp duty changes
Anyone considering buying a second property may have second thoughts during 2016, as huge changes come into effect from April 2016, which will hit buy-to-let investments and anyone buying a second home. Even buying a home for your children will be affected by the new rules, if you already own a property. The government introduced the new rules to prevent buy-to-let pushing up the cost of properties and making it difficult for first time buyers to get on the property ladder. From April, an extra three per cent will be added to the cost of Stamp Duty, which includes the initial £125,000 of a property. Anyone considering buy-to-let or buying a second home, may want to do so before March 2016.
North south divide
House prices have continued to rise, with experts predicting an increase of around seven per cent during 2016. The steepest property price increases have been in the south of the country, fuelling fears that the north-south divide will continue. According to the Office for National Statistics, the average price of a house in London rose by 9.8%, while in some parts of the north the average increase was just 0.4%. This trend is expected to continue into 2016, which may make it even harder for first time buyers in the Capital to buy their own home.
First time buyers
The government has introduced a Help to Buy ISA, which is designed to encourage first time buyers to save for a deposit on a home, while the government will add up to £3,000 towards the amount saved. Other Help to Buy schemes may continue to make it easier for first time buyers, although the first three months of 2016 may be unpredictable as landlords may rush to buy property before stamp duty changes take effect. The rising house prices may also make it far more difficult for first time buyers, who are already struggling to save a deposit for a home.
Experts believe that the Bank of England are likely to increase interest rates during 2016, although it isn’t certain. This may discourage buyers who don’t want to be facing large monthly payments for a home. Existing home owners may decide to remain in their current property rather than move to a larger home.
Renting versus buying
According to the Royal Institution of Chartered Surveyors, rent prices could increase at a faster rate than house prices during the next five years. One chief economist blames the changes introduced by the government to discourage landlords, including changes to tax relief and stamp duty increases. However, rents are likely to increase by 3% in 2016, while house prices will continue to experience a rapid increase. As rents increase, more people may consider investing in their own home.