What’s ahead for property market in 2016?

SALES • LETTINGS • NEW HOMES • COMMERCIAL • FINANCE • P R I VAT E S A L E S • D I R E C T O RY

THE 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 by?

“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’ managing director Peter Coles. “Higher increases will prevail in towns that are attracting more competition between first time buyers and investors, including Basingstoke, Bracknell, Guildford, Maidenhead, Reading and West Drayton.”

West Drayton has already experienced a 14% increase in house prices in the last 12 months, and with the arrival of Crossrail, the ongoing regeneration of former industrial units and the expected expansion of Heathrow Airport, Romans predicts that prices here will increase by another 10% in the coming year.

The lower end of the market will experience more activity with government Help to Buy schemes, including Help to Buy ISAs, and parental support helping first-time buyers onto the property ladder, but buyers need to act quickly, says managing director of residential sales Vincent Courtney.

“For the past 18 months we’ve been experiencing faster sales than ever before, with new apartment blocks selling out on the day of the launch, one and two bedroom apartments regularly receiving offers above asking price, and town centre terraced houses creating bidding wars at our property auctions.”

More competition between first-time buyers and investors

Chancellor George Osborne’s 3% surcharge on each stamp duty band where the property is being purchased as a buy-to-let investment or as 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,” added Vincent.

“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 property hot spots that attract many people moving away from London.The upper end of the property market tends to be slower but with continued demand from families moving away from London, competition remains strong, and downsizers are enjoying fantastic capital growth.

The 2015 Stamp Duty Land Tax changes were great news for 98% of home purchasers. However, those buying properties worth more than £937,500 now have more stamp duty to pay; something which has affected the market in London particularly. Although there’s very little evidence to suggest this has made a difference in the South East this is a trend to watch out for during 2016.

Rapidly rising interest rates a major threat

“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. As the smaller, specialist lenders continue to make their mark, the competition will continue, and new customers will benefit from exploring the market thoroughly or seeking advice from an independent adviser.

Rental yields to increase by 5–10% in 2016

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 restricted to 20% for buy-to-let landlords, they may – depending on tax status – face significantly higher tax bills..

The stamp duty surcharge, which comes into play from April 2016, will also increase each band by 3% where the property is being purchased as a buy-to-let investment or 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.

“Interestingly, although there are concerns throughout the industry about the constant legislation changes, we haven’t experienced any drop in demand from investors during 2015 and I don’t think this will affect the lettings market as much as some experts are predicting during 2016.”

Do you plan to sell or let property in 2016? To speak to a Romans property expert, call 01344 985 666.