With the fallout of the EU Referendum still continuing, we are no closer to determining the full impact of Brexit on the economy, or the property market. The impact of the vote on the UK as a whole has been startling and the ramifications are likely to continue for many years. The property market has been shaped by the vote but there have been a number of changes which have impacted on the property market in 2016.
If we have learned anything from historical data, and figures from recent years, when there is a major decision to be made in politics, the property market is dampened down. This is perfectly understandable because buying a home is one of the biggest decisions a person can make, and people want to know (as best they can) what the future holds before they make a major investment.
In 2014 the Scottish vote on Independence impacted on the market, in 2015 the General Election caused uncertainty in the build-up to the vote and of course, 2016 will forever be synonymous with the EU vote and the Brexit outcome.
In the run-up to the vote, potential buyers held off from following through with their property plans. In the aftermath of the vote, the uncertainty of what would happen and change has further convinced people to hold off. The worrying aspect is that by the start of November 2016, the country is no closer to knowing what Brexit will involve. Some buyers that held off have now made up their mind one way or another but there will still be potential buyers who want to be more certain about the economy until they buy property. The uncertainty that existed, and still exists, surrounding Brexit has definitely slowed down aspect of the UK property market in 2016.
On the 1st of April 2016, an additional 3% stamp duty was imposed on properties purchased by someone who already owns a property. This was implemented in the hope of dissuading landlords and property investors from buying property, giving first-time buyers more opportunity to operate in the market.
The impact of this stamp duty change can be seen in the run-up to its introduction and then in the aftermath. Unsurprisingly, there was a rush from landlords and investors to buy homes before the 1st of April deadline, which read to a surge in the property market in the opening quarter of 2016.
Once the additional charge had been implemented, there was a drop off in the market. Partly because fewer investors and landlords wanted to buy at a higher price and partly because these investors had already completed any planned purchases they had for the year or foreseeable future. Whenever there is a drop in people buying property, prices fall, and there were expectations that this would occur in the marketplace.
However, long-term change may not have been too much. The Nationwide stated that the number of mortgage approvals for property purchases rose by 1.3% from April to May. However, the number of approvals for March, April and May were 6% down on the figures for January, February and March; which highlights the increased volume at the beginning of the year in the lead-up to this change in the market.
The Brexit led to a number of changes or outcomes but one of the most challenging for the UK property market was the falling value of the £. This, virtually overnight, made it more expensive to buy items from abroad while making it much more affordable for people outside of the UK to buy from the UK.
This led to an increase in foreign buyers wanting to buy property in the United Kingdom, which helped offset some of the decreases in demand from UK buyers. However, the falling £ has led to some people holding off from spending and of course, UK property developers and builders that buy raw materials from abroad found they were paying more money for these items. This has led to an increase in the cost of building property, which leads to a rise in the cost of a property.
In September of 2016, it was announced that the Help To Buy mortgage guarantee scheme will be removed from the market at the end of the year. This scheme was put in place to allow lenders to provide mortgages to applicants with as little as a 5% deposit.
As this hasn’t been fully implemented, there has been no real impact on the market but this change has been introduced because of changes in the marketplace. Mortgage lenders have been more confident this year and they have introduced 95% mortgages to a wider range of buyers, including first-time buyers.
In May of 2016, Barclays received a lot of press and attention thanks to the reintroduction of their 100% mortgages. There were specific terms and conditions associated with these mortgages but it indicated that there was a greater level of faith being placed in mortgage applicants.
This should be taken as a sign that there is positivity in the UK property market in 2016. It would be easy to dwell on some of the more challenging issues but there have been as many positive aspects as negative aspects and it should also be remembered that a negative aspect for some groups of people will be a positive for other buyers.
2016 has been an eventful year in the UK property market but there is a level of optimism surrounding the market that should see potential buyers receive the support and assistance they require.