December 27, 2016
The year that was – here’s our round-up of 2016 and the London Property Market
Well, 2016 has been quite a dramatic year fro the London Property Market, hasn’t it? Hands up, who predicted Brexit, President Trump, Theresa May as the new PM and Boris Johnson as Foreign Secretary? The odds on all that would have been very high this time last year.
It’s also been a very eventful year for the property industry, with a number of controversial changes – some expected, some not.
Below, we take a look at some of the most ground breaking moments.
Stamp duty surcharge
In April the additional 3% stamp duty surcharge on second homes and buy-to-let properties came into play, triggering a late rush by landlords and investors to buy up properties before the deadline. Many feared for the death of the buy-to-let sector, with the increase in stamp duty and tougher affordability tests, but after an initial lull the BTL market has bounced back strongly as landlords and investors have adapted to the new marketplace.
Wear and Tear Allowance
The wear and tear allowance was abolished from April 6 2016, with a new system introduced for the 2016/17 tax year onwards. Previously, landlords with fully furnished properties could claim a flat rate allowance of 10% for things like beds, tables, chairs, sofas and other furnishings. From now on, however, they will only be able to claim the cost of replacing the furnishings they actually purchase. Before, the wear and tear allowance could still be claimed even when no new furnishings were replaced, but that will no longer be the case.
We can’t really do a summary of 2016 and not mention this monumental event, can we? Britain shocked the world by voting to leave the EU in June, and the ramifications for David Cameron and George Osborne were severe, with Cameron resigning as PM and subsequently quitting as an MP and Osborne relegated to the back benches.
Both sides were guilty of hyperbole and hysteria in the lead-up to the vote, but talk of plunging house prices, economic collapse and apocalyptic doom was clearly far-fetched and hasn’t come to pass. There was also talk that the property market would suffer badly in the aftermath of a Brexit, but since June everything has stayed pretty much as it was before, with estate agents, letting agents and other property-based people determined to take a “business as normal approach”.
While there has been undeniable political and economic uncertainty in recent months, the property market has weathered all these pressures and any changes or activity has remained steady and moderate rather than drastic and dramatic. Talk of house prices falling off a cliff has turned out to be as fanciful as expected.
Of course, much depends on what happens when Article 50 is triggered – March has been set as the date for this – and how the UK goes about withdrawing from the EU, but the property market has once again proved how resilient and robust it can be and will take any new changes or bumps in the road in its stride.
Letting agents’ fees ban
A surprise announcement in Philip Hammond’s first Autumn Statement as Chancellor, letting agents’ fees charged to tenants will be banned as soon as possible after concerted pressure from a number of campaign groups and MPs to have them abolished. There will be a consultation period beforehand, but the ban is expected to come into play early next year.
While tenants were left delighted at the move, some letting agents and landlords were left dismayed, insisting that it will be tenants who actually suffer most from these proposals in what they call a “boomerang” effect. In other words, letting agents say they will have no choice but to recoup lost revenue by charging landlords a higher fee. Landlords, in turn, will have no choice but to pass these extra costs to their tenants in the form of higher rents. So, in effect, the very people who are supposed to be helped by this ban could end up being the ones who pay out most in the long-term.
Supporters of the ban say there is no guarantee of rent hikes and argue that landlords may seek cheaper letting agents rather than upping rental costs for already hard-pressed tenants. They also point to Scotland, where a ban on fees has been in place since 2012. There has been no drastic reduction in the supply of rental property north of the border, plus rents haven’t risen significantly.
Although there will be a consultation period – giving industry bodies and other interested parties the change to argue their case – there is very little prospect of the government backtracking now the announcement has been made. It will, however, only become clearer what exactly the fees ban involves once it is implemented fully.
While 2017 is unlikely to be anywhere near as dramatic as the year that has preceded it, there are still some big changes coming into play, in particular the phasing out of mortgage interest tax relief from April 2017. This will mean landlords are no longer able to deduct mortgage interest from their rental profits, which will hit those in highest paying tax brackets – which most landlords exist in – the hardest.
For more help and advice on buying or selling a home in London, please get in touch with Atkinson McLeod.
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