A new report issued by the Royal Institute of Chartered Surveyors has indicated that UK property prices will continue to rise for the next five years at least, and London will be leading the way once more. Increases of five per cent per year are expected across the capital during this period, with the South East and East Anglia following suit. This means that, should the prediction come to pass, homeowners could see their properties increase by an astonishing 27.5 per cent over the next half-decade.
However, the rest of the UK is not far behind. Average property price increases of 4.5 per cent, per annum, are expected elsewhere as well, which means the future looks promising for homeowners across the length and breadth of the country as we head towards 2020.
What’s fuelling the positivity?
As ever with the UK property market, much of the upward movement in prices is simply down to supply and demand. December (2015) was the eleventh successive month where enquiries from buyers outstripped the amount of new homes entering the marketplace, a statistic that will always lead to price increases. This imbalance looks set to continue for a while yet, so house prices are expected to push forward for the foreseeable future.
Greater London - especially areas close to London Underground stations - has experienced surging demand for property over the last year, and this trend looks set to continue. House prices within zones 1 to 3 are rapidly becoming out of reach for ordinary Londoners, so buyers are beginning to look further afield during their search for property. However, many of these prospective homeowners still require relatively easy access to Central London for work.
All this means that areas such as Wanstead have become extremely popular of late. And, with the capital’s population predicted to hit 10 million before 2030, house prices away from the city centre will undoubtedly continue to rise as the demand grows greater still.
Is the rush for buy-to-let property distorting figures?
New measures, dubbed by many as ‘landlord tax’, were recently announced by the chancellor whose hope was that their introduction would lessen the amount of homes being snapped up by private landlords across the UK. However, the announcement, fairly predictably, has created somewhat of a rush to beat the April deadline when the changes will first come into effect.
From then on, smaller land and second home owners looking to invest in a buy-to-let property will be faced with an additional three per cent stamp duty surcharge on their property. This includes those who currently own property abroad but not in England, Wales or Northern Ireland.
For example, if you already own a holiday home in Spain (or even Scotland) but do not own your own property here, the new charges will still apply when you purchase your first property in either England, Wales or Northern Ireland. Companies and individuals who already have 15 properties or more on their books, on the other hand, will be exempt from the increase.
The new charges will even mean a £3,000 tax bill for those buying an investment property valued at £100,000 - a purchase which under the current system incurs no tax whatsoever! As for investors looking to purchase a property of £500,000 in value, their stamp duty bill will double from £15,000 to £30,000 - so it’s easy to see why the market has been heating up of late.
That being said, although the market has seen a surge upward thanks to the increased demand from those looking to beat these incoming changes, this does not affect the validity of the forecast made by RICS. We believe that, for London and its surrounding areas at least, five more years of growth at a rate of five per cent is a perfectly reasonable prediction.