ReutersBritain’s house prices have gone crazy in recent years.
And guess what? It’s going to get worse over the next five years.
The housing shortage and rampant demand are causing prices to constantly rise. On top of that the government installed new stamp duty tax rates. Buyers rushed to complete deals — and save money — before the new charges came in, further stoking demand.
The Royal Institution of Chartered Surveyors said in a research note on Thursday morning that the number of buy-to-let investors in the market is now going to wane after the initial rush to escape the rise in stamp duty for landlords and second home owners.
Stamp duty is a tax placed on buyers when they purchase a property in the UK. The stamp duty applicable to these buyers will come in at 3% extra on the cost of a new purchase in April and RICS says that this will hold back buy-to-let investors for three months.
But, that will only offer short-lived relief.
RICS said that house prices are still going to rise by a huge 25% over the next five years. Considering the average wage for a British worker is just under £30,000 and salary growth is a huge problem for policy makers — it’s hard to comprehend how the average person will be able to keep up with price rises. In other words, properties are going to become unaffordable.
“Over the past three months, we have witnessed a surge in buy-to-let activity. Since the Chancellor made his Autumn Statement announcement last November, investors have rushed to purchase homes before the Stamp Duty surcharge comes into effect,” said Simon Rubinsohn, Chief Economist at RICS.
“It is inevitable that over the coming months, April’s Stamp Duty changes will take a little of the heat out of the investor market.
“While there remain significant doubts as to whether the Government’s plans to encourage a more robust development and construction pipeline will be sufficient to address the housing crisis, long-term price indications for the housing market remain strong, with respondents still expecting them to rise by a further 25% over the next five years.”
In February, Halifax’s house price index showed that house prices rose 9.7% in January on an annual basis to £212,430. The Office for National Statistics showed London house prices hitting £536,000, in data published this month.
It’s due to a housing shortage. There are too few properties on the market for the amount of people looking for a home. This month, a study published by Santander showed average house prices will more than double to around £500,000 over the next 15 years.