When the chancellor first announced the new stamp duty hike last year, the majority of potential homeowners and investors expected the property market to cool off and for prices to go down across the board. This policy was especially supposed to hit the lower end of the market, such as studios and one bedroom apartments, which are most popular with investors. The scheme was supposed to help first time buyers get on the property ladder by making the buy-to-let market less attractive for investors. However, ahead of the stamp duty increase the market has increasingly moved in the opposite direction. A number of factors has kept demand high such as a better availability of mortgage products, and a higher numbers of deposits gifted by family members.
It’s not just demand…
We are seeing a severe shortage of one-bedroom apartments in all areas which has pushed prices up and they are continuing to rise, according to Rightmove supply was down by 1.5% year on year. Despite the increase in stamp duty, investors are still keen to purchase one-bedroom flats because they make good long-term investments due to their higher yields, potential for capital gains and consistently high demand from tenants. At this point it’s safe to say the tax hike hasn’t had it’s desired effect on the property market, especially in hotspots such as London and the South East.
It remains to be seen now that the tax year has ended whether the Chancellors policy will have its desired effect on cooling the UK property market. However, it is clear to see that currently, first time buyers are finding it harder than ever.