23 December 2016
As we approach the Christmas festive period it's traditionally the time to reflect on the events of 2016. So what were the significant developments for the market this year and what could lie ahead in 2017?
BREXIT! Well, the outcome of June's referendum certainly took large swathes of the country by surprise and there was an immediate reaction from the financial markets both at home and abroad. Whilst sterling's exchange rate is still significantly weaker than prior to June 23rd the value of stocks have largely recovered. But what of property values? Our own experience in the latter months of 2016 is that prices have generally held up. Whilst fresh properties coming to our register have not flown off the shelves, as before, we have secured sales at asking prices or close in the majority of cases.
Perhaps a more significant impact on the local market – and one which has largely been overlooked - was the government's introduction of new stamp duty levies on investors and second home owners in April of this year. The new tax ensures that such buyers are required to pay an additional 3% stamp duty in addition to the existing duty which single homeowners pay. For a purchase of £250,000 this equates to an additional £7,500! On top of heavier up-front costs, the further bad news for investors is the introduction in April 2017 of the restriction in the deduction of relief for mortgage interest payments on let residential properties. This is being phased in over the next four years which will create a greater tax burden for those heavily mortgaged investors. The result is that, unsurprisingly, investors have been conspicuous by their absence in the latter part of this year. When considering that – in the recent past and in the 'low to mid' price bracket for local homes – investors have comprised upwards of a third of all buyers for properties coming to our register this represents a significant shift. It could result in the softening of property values in the short to medium term which have seen a rapid rise in recent years due, arguably, to temporary and somewhat artificial conditions.
The market, ultimately, will find its level. If fewer properties are available to rent, rents will likely increase. Faced with higher tax bills and weaker yields in future years, some investors may decide to realise their assets and sell. A stronger flow of available property to the market may subdue prices which, ultimately, is what the government's aim appears to be. And back to dear old Brexit – which, if we're honest – hasn't yet happened. Whether it be a 'soft' or 'hard' Brexit much uncertainty lies ahead and, if there's one thing on which we can be sure, the market doesn't like uncertainty. However, despite the recent hike in Bedford property prices there would still appear to be some value in the town when compared with others across the county borders of Hertfordshire, Buckinghamshire and Cambridgeshire. Whilst interest rates remain at a record low and Bedford's improving communication links attract more commuters the prospect of steady growth remains.