During 2015, the way in which stamp duty was calculated was changed with the previous system creating bands that were not necessary and that held prices back to key figures like 250,000 or 500,000. A progressive tax system was introduced where new rates apply to the amount of the purchase price that falls within the stamp duty band. This has helped the market as well as first time buyers and anyone purchasing a property for less than 937,500 made savings of up to 4,500 on stamp duty costs. For those paying over this figure, they have been hit with an increase.
The General Election did not damage the demand for property in the way that many predicted but there was a slight break in demand during the build up to the election as a result of uncertainty surrounding the results. After May, the market movement increased again and it progressed as the year went on. House prices increased across the UK by 9.5% but prices in London did not do as well but there has still been a healthy increase. This growth is down to the fact that there is a shortage of property and demand is still high.
The economy on the whole is improving and wage increases are implemented and this has led to a rise in demand, however, the number of properties entering the market has barely grown in 6 years. This is likely to continue for some time and the belief is that prices in London will continue to move upwards with price increases predicted to rise.
The Mortgage Market Review which was introduced in 2014 has maintained its grip on lending criteria and Banks and building societies are likely to make their stress tests more thorough as an interest rate rise could be around the corner.
The chancellor has made it clear that rates are likely to move upwards but nobody knows when or by how much but the predictions are saying that a rise of 0.25% is likely at the end of the year.
The government has made housing a main priority and they have promised 200,000 new homes each year during this parliament. They have also promised to help small and medium house builders in order to help them build more homes. The government are keen to push home ownership with the introduction of schemes to encourage first time buyers to save while being offered discounted first homes.
For those who are looking to enter the buy-to-let market, 2015 was not a great year. The Chancellor announced changes that would impact small to mediums sized landlords and this included a reduction in tax relief and a 3% increase in stamp duty on investment property and second homes form April 2016.
These measures have come in to help cool the buy-to-let market which was growing at a fast rate. They have been put in place to put amateur investors off which would free up property for owner-occupiers but it is likely that rents will increase as new supply is condensed.
The media have made a lot of noise about how the buy-to-let market is coming to an end but there are still many reasons to invest, especially in other similar markets like the student accommodation investment sector. As rents increase in the medium-term it is possible to have good returns.
Legislation is changing and financial penalties are growing which makes it more difficult to have a good return and this will put many people off. However, there is a still a huge demand for property in London and this will mean that rent will increase. This proves that now is a good time to invest in a buy-to-let property and doing so, before the end of March will ensure that you do not have to pay the added 3% stamp duty.