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The Chancellor, in his Autumn Fudge-It, has decreed that, with immediate effect, first time buyers will pay no stamp duty on properties up to £300,000. So, good news you lucky things... you can now afford that one bedroom flat in Oxford that you have always dreamed of. Right?
OK, I admit to being a little facetious here. My comment above isn't to disparage anybody's one bedroom flat, nor anybody's aspirations to own one. It is intended to give us pause for thought, to help us see past the headline, to try to bring us back down to Earth and remind us that we are still in this incredible situation where, across so much of Oxford, a £300,000 budget barely gets us onto the ladder. Who cares about the saved stamp duty, really? Stamp Duty can be a problem, no doubt; but it is still a drop compared to the deposits that our young people need to save in order to go for that first mortgage. I care more about how first time buyers can afford to save those deposits, especially when it's nigh on impossible to rent even a single room in the city for much less than £500 a month - add on everything else that life costs, how can anyone afford to save anything? Not everyone is lucky enough to have parents willing or, ultimately, able to lend a helping hand to contribute towards (or even 100% fund) their deposit, and that is creating an increasingly uneven playing field, and an unfair market place.
Philip Hammond isn't a bad chap. He may even be one of the good guys. He does have a tough job and he has struggled - as ever - to have much room to manoeuvre when it comes to delivering the sort of killer Budget that we could all do with, in the face of what is a faltering economy (and that is not really his fault (well, it's not!)). Actually, the risk of this new (regurgitated) stamp duty 'give away' is that, despite the initial face-value bonus provided to first time buyers, all it might actually achieve is an increased demand by those first time buyers for property at a moment in time where we already know there is not enough supply, and therefore this is feasibly going to be a measure that only drives prices up and even further out of reach.
And before anyone starts (and someone will...), the prices we see in Oxford really aren't caused by a secret cabal of Estate Agents deliberately collaborating to overvalue properties in order to push fees up, just so we can all go and guffaw together about our cunning schemes during Champagne-fuelled Friday night binges. This is Conspiracy Theory stuff. Estate Agents exist in cities, towns and villages across the country, and not everywhere has the price issues we do. We have a price issue because we have a limited-housing-stock issue. There are more people wanting to own a property here than there are properties available, and we do not have enough new property being built locally, quickly enough, to supply the market with the deluge, not the dribble, of new properties that the market needs to satisfy demand, provide affordable and social housing stock, and slow down house price growth. Either that or we all need to earn more, but given that the real news that came out of the Budget today was that productivity and economic growth is down (*cough*-Brexit-*cough*), that isn't happening. To further labour my point then, the only proactive way to solve the price issue we have, in a city where the average property is worth 16 times the average salary, is to build, build and build.
I am much more encouraged therefore by the talk in this budget of the compulsory purchase of 'land-banked' land that is otherwise being held on to by developers, land with planning permission in place but work not being started; and I am encouraged by talk of large scale new-building: an extra 300,000 new homes per year by the middle of the next decade; an extra 100,000 homes for Oxfordshire by 2031; and a renewed pledge to push on with the Oxford to Cambridge 'Expressway' in line with that program. This talk is good talk - talk that is digging into the problem and actually proposing real solutions. But, talk is so cheap, and there was really nothing concrete enough said about forcing developers to develop, other than offering a 'review' of the situation in time for the Spring Statement which may then lead to compulsory purchase powers being implemented if deemed necessary. Well, call me a sceptic, but.... . And, 300,000 new homes per year by the middle of the next decade... not to mention 100,000 new homes for Oxfordshire by 2031? Sounds distant enough yet in both cases to take the pressure off getting started in earnest particularly quickly, with time for plenty more Autumn Fudge-Its and Spring Scapegoats in the meantime. Anything can happen.
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The news today that the Bank of England has increased the Interest Rate (you will often hear talk of the Bank of England Base Rate, if you are ever talking to mortgage advisers) has not come as a surprise, and in fact we had even predicted that it would be in November this year! The question is whether or not we should be worried.
There are always winners and losers when rates change, and these can loosely be called Savers and Borrowers; Savers win when rates rise, and suffer when rates go down; Borrowers can feel better when rates are low, but are potentially put at greater risk when rates start to go up.
Borrowers who have loans or mortgages that are linked directly to the Bank of England Base Rate, for example those on so-called 'Tracker Mortgages', are going to feel an immediate effect on their repayment amounts, which will go up. Borrowers with loans or mortgages that are on Variable Rates will have to wait and see, as the decision about whether to increase the interest rate on those loans lies with the lenders themselves. Borrowers on fixed rate deals will see no change at all of course, but perhaps will find that if they wish to remortgage after a fixed rate deal comes to its end that they will drop onto a higher Variable Rate than they expected, or may find it more expensive (potentially) to remortgage when the time comes; effectively, the cost of borrowing may be higher than the last time they did so.
Ultimately though I would urge people, for the time being, to remain calm enough in this case. The Interest Rate has risen by just one quarter of a percent - so, 25p for every £100 borrowed, which is a little over £20 per month for every £100,000's-worth of loan. I am not saying that is 'small potatoes', and it is not to dismiss individual concerns of what an extra £20-odd per month means to them - it is simply to put it into context for anyone who had not yet worked it out for themselves, in the hope (if anything) that it may ease fears of what the extra burden might mean.
It is also actually just a simple reversal of the 0.25% reduction to the Bank of England Base Interest Rate made last year, which dropped 0.25% from the 0.5% rate that it had been sitting at for nine years. That drop last year was a response to the Brexit Referendum Result and a move to restore confidence in an under-confident market place - never something, when it meant that the rate was only 0.25%, that was going to be sustained long term. And indeed, when talking about 'long term', let's remember how low a rate of 0.5%, as it is now, really is. The average Interest Rate since the Bank of England came to be some four centuries ago has been 4.7%, and in fact in the past 100 years the average has been over 6% - so 0.5% is remarkably low, still.
The real and understandable worry might be that rates continue to rise and potentially even return to the 6% levels that we had been used to until as recently as the past decade. Well, 'never say never', but the market economy is a different beast today, and as far as my own view goes I agree with a majority view at the moment that we may see a total of another 0.5% rise over the next two to two-and-a-half years, with another 0.25% rise at some point next year and another in either 2019 or 2020, but I suspect that there will not be any greater rise than that before the end of that year.
If you do have concerns about what it means to you, and what you should plan to do with either the mortgage that you currently have or what to do when your fixed rate comes to an end down the line, then I recommend speaking to a qualified mortgage adviser. Our own in-house mortgage service is one that is genuinely 'Whole of Market', and we can advise you on which mortgage will be the best for your individual circumstances and needs.
If this is of interest, please call us on 01865 435175.
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So! Here we are, at last – 2017!
Well, 2016 was a topsy-turvy year, alright; we said a fond farewell to David Bowie, Alan Rickman, Terry Wogan, Zsa Zsa Gabor, Andrew Sachs…. amongst many others. We saw the UK vote for Brexit; we saw England crash out of the Euros in the Group Stages; we saw a Billionaire Tycoon and Reality TV Star with no political experience win the election to be the next President of the United States of America…
Sorry, I’m trying to think of some good things that happened too… Oh yes! Team GB finished second in the medals table at both the Olympics and Paralympics, and Andy Murray became World Number 1! I’m sure there was some other good stuff in there too. Somewhere.
As for the property market, we saw some changes. On April 1st, stamp duty increased for second purchases, adding an extra 3% levy on top of what would already normally be due. This means that for people purchasing a buy to let property at £250,000, their stamp duty would have been £2,500 on March 31st and before, compared to £10,000 on April 1st and since. Quite a change, right? And of course in a place like Oxford purchases higher than £250,000 are very much the norm.
The number of Buy-To-Let transactions going through certainly have reduced, which was absolutely the intention; however, our own experience is that it opened the door for more general residential buyers to compete in that market place, including First Timers (also the intention). Good access to credit meant that mortgages were not hard to come by, and various incentives and schemes have been around providing help for some who were unable to make that step previously, and this trend will continue.
Then we had the ‘Brexit’ debacle – sorry, I mean, then we had the ‘Brexit’ situation…. Look, I won’t harp on. Safe to say, I am unquestionably a ‘BRemainer’, and therefore was expecting End of Days when the result didn’t go my way. But, you know what, we lost two sales that first Friday morning ‘as a result of Brexit’, we then resold one of them on Saturday, and then on Sunday sold the other at £10,000 higher than first time round. I really can’t claim it has been bad for business... other things, perhaps, but for the property market, I’ve not seen it. We did not experience any drop in sales this year despite both the Stamp Duty change and the Brexit vote happening; in fact we did over 25% more sales in 2016 than in 2015.
So what will 2017 mean for the property market? Well, we think it will be stable overall, and particularly in Oxford. The worst forecast that I have seen (or at least, of the forecasts that I give credence to) was from Savills predicting zero house price growth in 2017 nationally. It’s just my opinion, but I tend to optimistically disagree when it comes to our local market, and expect to see a modest rise in property prices between now and this time next year, around 2%-3%... not as fast as in previous years, but frankly there’s a lot to be said for slow and steady to stabilise a marketplace. There is uncertainty around, with Brexit negotiations yet to come, and with global events inevitably affecting our own domestic market. But ultimately, especially here, we have a high demand for housing and a lack of supply meeting that demand, which means that sellers in 2017 can feel encouraged to go ahead, as competition amongst eager buyers with access to credit will keep the market moving steadily forwards.
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