With Brexit taking the bulk of the news minutes in the UK, and being blamed for all manner of mayhem and confusion – whether rightly or wrongly – other factors in economic change are often ignored. The housing market is a great example of this, and problems in the housing market may be the result of cultural changes, not necessarily negative ones, that are occurring in our country. People are moving less often than in the recent past, and that trend, whatever the cause, is taking out the real estate market at the knees.
A lack of surety is generally cited as the reason people move less. That may be caused or inflated by Brexit, but there are other factors too, some of which might be far more impactful than Brexit.
The flux of global politics seems to be a large influence in the £5m+ markets, such as Mayfair and the like, but is not likely to be a major issue in the Sheffield area. The issues in this area are likely to be much more regional.
One of the biggest drivers in the area at present seems to be the effect the actions of Buy To Let Landlords over the last fifteen years. It has been easy to make money as a buy to let landlord during this period, but dynamics have changed. The changes in taxation brought in by Osborne has taken a bite out of the cash flow. A supplementary stamp duty of 3% means that they pay more than first time buyers. Previously, high rate taxpayers have been able to offset interest payments from buy to let mortgages against self-assessment tax bills, at the marginal rate. This ability is being phased out between now and 2020, and only the basic rate of tax will be used – not the marginal. This means that, overall, there will be smaller margins and earnings will decrease. This, coupled with the recent changes that make it more difficult to get buy to let mortgages, mean it’s a bit easier for first-time home buyers, but less attractive to property investors.
The overall effect is a depression of home sales compared to previous years which, if it continues to intensify, may signal a crash in the market.