The general election is just months away and with all the major parties throwing different ideas around relating to housing and taxation, there is a distinct air or uncertainty which is being reflected in the housing market and is being exacerbated by a sense of ambiguity towards the election. This period of trepidation is making people question; how will potential changes affect a seller or buyer individually? How will they affect the market as a whole? Whilst people contemplate and hesitate, the market is stalling.
The threat of a mansion tax proposed by both the Labour and Liberal Democrat parties is resulting in a clear threshold point at £2million. This is slowing the top end of the market, which is already suffering due to recent stamp duty reforms. This has resulted in a far more regressive system. All homes sold above £937,000 will cost more prior to the change in legislation. The fear of the imposition of the mansion tax could cause a collapse between the £2million and the £2,500,000 mark as property prices are forced below £2million. Buyers with a budget of up to £2million could find themselves picking up a bargain (relatively speaking!)
Sellers are eager to achieve a sale prior to the election to protect themselves against a fall in house prices. Schemes of expansive new housing estates or the relaxation of planning laws with the hope of stimulating development and construction are always a possibility post-election when new policies and initiatives come into play.
However, buyers are also being deterred due to the uncertainty surrounding interest rates. Any rise in rates could really cause people who are not on a fixed rate mortgage to suffer. The uncertainty is making lenders more wary and making mortgages more difficult to obtain. So while sellers are hoping to rid themselves of their property prior to the election and would accept a lower than usual offer, buyers, due to mortgage constraints are not in the position to capitalise on this resulting in the market temporarily stagnating.
Labour have also made an election promise of empowering councils to prevent investors buying new builds with the sole intention of renting them out. With this is mind many buy-to-let investors are being deterred from buying new builds in case, post-election, renting them out is no longer an option. This, combined with the increasing difficulty for first-time buyers to acquire a mortgage means that the potential pool of buyers for these new build homes is decreasing and consequently pushing prices down.
Realistically it could be many months until confidence returns and the housing market starts moving again. If you are in the fortunate position of being a cash buyer there could certainly be a bargain waiting to be snapped up.
Written by Kate Lovering of Polecat Properties.
Telephone (01424) 217337.