The Property Market 2017 – What’s ahead this year

13th January 2017

With the Christmas and New Year holiday season out of the way, we reflect on the past year and 2016 was a turbulent year for the economy. With the Brexit decision and the subsequent drop in value to the pound, households have been told to prepare themselves for a tough year ahead with expected inflation rises.

The Bank of England is expected to keep interest rates on hold at 0.25 per cent as inflation is set to rise, which will help with mortgage repayments. Figures released by the Bank of England at the end of 2016 showed monthly mortgage approvals increased by nearly 4,000 in the October, the highest point since March 2016. This was really positive considering the past six months post-referendum market uncertainty.

Article 50 is yet to be triggered and once it does there is an expectation of initial turbulence and uncertainty, however once this settles down the economy is expected to stabilise again by 2018.

Chancellor George Osborne announced changes to landlords’ profits that will be implemented from April 2017. It will mean that those in the 20 per cent income threshold should see no change, however, those in the higher income thresholds will see some considerable changes to their yield.

HM Revenue and Customs (HMRC) will introduce a restriction to finance cost relief for individual landlords gradually from 6th April 2017. Announced in the Summer Budget 2015 and now set out by HMRC, landlords will be able to obtain relief as follows:

  • in 2017 to 2018 the deduction from property income (as is currently allowed) will be restricted to 75% of finance costs, with the remaining 25% being available as a basic rate tax reduction
  • in 2018 to 2019, 50% finance costs deduction and 50% given as a basic rate tax reduction
  • in 2019 to 2020, 25% finance costs deduction and 75% given as a basic rate tax reduction
  • from 2020 to 2021 all financing costs incurred by a landlord will be given as a basic rate tax reduction.

The government’s housing White Paper is due to be published later this month and it is expected to set out radical plans that will help to boost the UK’s housing supply, with measures to increase house building numbers. The paper, which will lay out Goverment plans on tackling the housing crisis will also give details on one million new homes that hope to be built by 2020.

In addition, further measures which include the funding of an expanded regional pilot of the Right to Buy for housing association tenants, and the launch of a consultation on banning letting agents from charging fees to tenants, will take place.

The housing market appears to be set for significant changes and we will have to wait and see what happens over the coming months as we progress in early 2017.

Tony Freeman
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