Britain’s house prices have gone crazy over the last few 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 Britain’s government installed new stamp duty tax rates which saved buyers thousands of pounds on fees, which further stoked demand in the already oversaturated purchasers demographic.
The Royal Institution of Chartered Surveyors initially gave the market some respite in a research note this morning by saying that the number of buy to let investors in the market is going to wane after initially rushing to the market 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. The stamp duty applicable to these buyers will come in at 3% 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 place shortlived relief on buyers in Britain’s housing market.
RICS said that house prices are still going to rise by a huge 25% over the next five years.
“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 house. This month, a study published by Santander showed average house prices will more than double to around £500,000 over the next 15 years.
But the average wage for a British worker is just under £30,000. So if RICS and the other firms are correct — it looks like house prices will become almost unaffordable in five years’ time.