HE fact that house prices will continue to rise is no secret.There is simply no good reason why they wouldn’t – demand from buyers is stronger than ever, there isn’t enough supply to satisfy the demand, and there are nowhere near enough new builds. But how much will they rise?
“I believe house prices will rise by 5–10% in most of the towns we cover and the increases will predominantly be seen in the first half of the year,” commented Romans’ group managing director Peter Coles.
Beaconsfield, with its good school catchments and private education choices, remains popular with families moving out of London.A lack of new builds has also resulted in a supply and demand imbalance in and around the town. Following a growth of 9% in house prices last year, Romans is predicting prices in Beaconsfield to rise a further 5% in 2016. In Gerrards Cross, also popular with families looking for good schools and a relaxing lifestyle, house prices are expected to rise 5% this year, following a similar rise in 2015.
Prices in Burnham are predicted to rise 7% this year, says Romans, up on the 5% increase in 2015, thanks to the impending arrival of Crossrail. Chancellor George Osborne’s 3% surcharge on each stamp duty band where a property is being purchased as a buy-to-let investment or second home could result in even more competition between first-time buyers and investors.
“We’re expecting to see a surge of interest from investors looking to purchase investment properties before April 2016, in order to avoid the extra charge,” said managing director of residential sales,Vincent Courtney.
“I understand the frustration of first-time buyers who are often competing with investors. Concentrate on organising your finances before you even start looking; this will put you in just as good a position as landlords, and demonstrate that you’re a serious buyer.”
At the upper end of the scale, detached properties are selling more than any other property type in most of the areas Romans covers.This is partly down to London home movers leaving the capital for surrounding regions in search of more cost-effective property.The Thames Valley and surrounding areas are hot spots that attract many people from London.
The 2015 Stamp Duty Land Tax changes were great news for 98% of home buyers. However, those buying properties worth more than £937,500 now have more stamp duty to pay; which has affected the London market in particular.Although there’s little evidence to suggest this has made a difference in the South East, this is a trend to watch out for during 2016. “Today’s marketplace is very much in the favour of sellers, however, I expect interest rates will begin to rise in 2016, reaching 1% by the end of the year,” said Peter Coles.“We know it will have to happen soon and once the rates begin to rise I believe a lot of people who were sitting on the fence will decide to make their move.”
Interest rates aside, competition between mortgage lenders is currently extremely fierce and people are getting some outstanding deals; whether they’re first time buyers, remortgaging, or purchasing buy-to-let products. Average rental values across the areas Romans covers are all higher than the national average, and with tenant demand increasing it’s inevitable that rents will rise.
“I predict we will be seeing at least a 5% increase in rental yields by the end of 2016, with higher increases in the second half of the year following any rise in interest rates as landlords will start to expect to recover increases in mortgage costs,” commented managing director of lettings, Peter Fuller.
Now that mortgage interest tax relief is to be restricted to 20% for buy-to-let landlords, they may – depending on tax status – face significantly higher tax bills.The stamp duty surcharge will also affect buy-to-let investors as well as those buying a second home. Peter Fuller added:“This may not be positive news for landlords, but it’s important to note that buy-to-let is a long-term investment and in that sense it can still be very lucrative; with house prices predicted to rise by around 25% in the next five years, ongoing demand from tenants, and the low buy-to-let mortgage rates currently available.
To read the full version of this article, see romans.co.uk/predictions.Thinking of selling in 2016? To speak to a Romans property expert, call 01344 985 666.