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Before I give you my predictions for 2016 how did I get on with 2015?
At the start of 2015 I predicted that there would be an upturn in the property market with a 10% increase in activity levels and a small increase in the average house price. I also said that developers would require to take up the strain and that there would be a requirement for Government to provide assistance in the property market for both new builds and 1st time buyers. I warned about the impacts of the General Election and also the creation of some form of Mansion Tax. So what was the actual outcome for 2015?
The market started off slower than predicted and uncertainty in relation to the General Elected did seem to have an impact. Whilst I do not have final figures I feel that the number of properties coming on to the market in the 1st quarter (January, February and March) was probably the same as the corresponding quarter in 2014. Quarter 2 saw a slight increase as did quarter 3 however quarter 4 actually took a slight dip as there seemed to be reluctance for people to list their properties for sale. Higher value properties surged prior to the introduction of the new LBTT rates and thereafter dropped off quite dramatically but over the piece the average house price has probably risen by more than I had anticipated given the difference between supply and demand.
We also saw Mortgage Brokers speak of increased difficulties in getting mortgages approved due to affordability tests and they also confirmed that there were a higher number of applicants. There was also a steady increase in Buy to Let investors. The geographical differences still apply with Edinburgh and Glasgow property markets showing considerable increases in activity levels and prices meanwhile the Dundee market showing a “steady as she goes” approach with the Aberdeen market reflecting the down turn in the oil price. There was a continued growth in the number of 1st time buyers which as readers of previous blogs know I place a very high importance on given that this is given a clear indicator of economic activity and healthiness in the property market.
So what can we expect in 2016? I think we can apply a very similar message to that of 2015 with the catchphrase still being “cautiously optimistic”. I think the quarter 1 listing figures for 2016 will be a clear indicator of what path the property market is going to take. For example, are we going to see stagnation with high prices and limited properties coming on the market? My hope is that during quarter 1 we will see an increase in the number of properties coming on the market and also an increase in the amount of new build stock available from developers. I anticipate that this increase in stock, in addition with changes in LBTT, will have a curtailing impact on property prices with any increase being more reflective of income. I think that there will be an increase in the Bank of England base rate towards the end of 2016 although this will be and perhaps already has been priced into mortgage deals sooner. There may be some potential bumps on this road:-
1) The Scottish Government Election in 2016 could lead to an increasing uncertainty. As an aside I have heard it mentioned that property investment in Scotland is being curtailed due to the perceived risk of political uncertainty with continued talk of a second referendum: A blog will follow shortly!
2) I believe the changes to LBTT will have a detrimental effect on the property investor market in Scotland and will also impact the property rental market.
3) Brexit – Whilst not having a direct detrimental effect on the Scottish property market, a European referendum in 2016 may lead to increased political uncertainty with a vote in favour from the EU being a catalyst for a 2nd Independence Referendum.
In relation to Scotland my wishes for 2016 would include:
- The removal of the Home Report
- Increased assistance for 1st time buyers at the lower end of the price bracket
- A review of the LBTT bandings and also this question of a 3% surcharge for second properties.
- I would also urge the UK Government to revisit the removal of tax relief for Buy to Let investment.
In summary I am predicting a 10 – 15% increase in market activity with a slight increase in house prices probably averaging around the 2 – 4% mark. The figures I will be looking at with most interest will be the number of properties coming on the market in quarter 1.
I wish all readers a Happy New Year and I will continue to keep you advised of trends in the property market.
Partner – Head of Property