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Stamp Duty Change in November has immediate impact on First Time Buyers
Although December is normally anticipated by many to be a quiet month in the lead up to the holidays, the entry level of the market saw an unexpected boost at the end of November with the introduction of the Stamp Duty (SDLT) incentive for First Time Buyers by the Chancellor.
At the time, it was suggested that, far from assisting First Time Buyers to get on the ladder, this might actually benefit vendors by giving them the opportunity to ‘push’ pricing when coming to the market due to first time buyer demand, with RICS predicting that prices at the entry level of the market could rise in response to the new measures. Additional recent commentary from RICS also suggests that outside of London, many Surveyors believe that the savings will have a limited impact on affordability for First Time Buyers. If this is proven to be the case, it’s possible to suggest then that it will be sellers who will be the main beneficiaries.
Collating the data after the first month of the scheme being operative, albeit at this early stage, we would suggest that the impact highlights the diverging markets of the UK, with some areas showing noticeable increases in the prices paid by First Time Buyers in December. Of course, whether this reaction is just temporary or the start of a longer-term trend remains to be seen.
Mortgage Advice Bureau data is based upon mortgage applications therefore this provides a reliable indicator in terms of consumer activity.
Elsewhere in the market, transaction volumes remained steady in December with the overall total number of properties sold in 2017 at 1,223,400, according to HMRC, which is broadly similar to the overall number of property transactions in 2016. We also observed a slight increase in the average purchase price in December, which is likely to be the result of the trend of regionalised price growth and activity over the last few months in areas such as the North West, Yorks and Humber, Midlands and South West. All of which are areas which would appear to have benefited from improved transport links and infrastructure investment, offering those seeking an alternative to the Capital and South East the ability to purchase more home for their money.
Overall, it’s possible to suggest that these factors are reflective of a market which has withstood political and economic uncertainty over the last twelve months; ongoing Brexit negotiations together with the first interest rate rise in 10 years, as well as the implications of Article 24 beginning to realise its full impact on landlords. The latter factor is borne out by our data suggesting that the average purchase price of a Buy to Let property decreased month on month in December, as well as year on year, due to what we would perceive as decreasing landlord demand.
Overall though, sources such as the Nationwide suggest that the average annual rate of growth in 2017 was 2.7%, which is absolutely in line with market forecasts at the beginning of last year which suggested annual house price growth would be between 2% and 4%. Bearing in mind that we’ve seen far fewer discretionary buyers and sellers in the last twelve months – which arguably has been one of the key factors leading to the low levels of stock in many areas – as well as a discernible decrease in the amount of landlords adding to their portfolios, one might suggest that the level of growth and transaction volumes for 2017 as a whole represents a stable market underpinned by ongoing consumer demand as we start the new year.”
* First Time Buyer prices paid data based on Nov 2017 and Dec 2017.
To read more about this month's National Mortgage Index, click here
In an Autumn windfall, First Time Buyers just benefitted from a very welcome boost to their deposit savings, courtesy of Chancellor Hammond.
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