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Housing market reacts as snap election takes hold

In an article running in the latest edition of India Link magazine, Indu Johal and Jem Gova of The Sethi Partnership Solicitors Conveyancing Team explore the impact of the June snap election on the housing market, and offer some practical advice for those currently looking to invest. You can read the article in full below.

Prime Minister Theresa May announced on 18th April 2017 that a Snap Election would be held on 8th June 2017. According to industry experts, the market is expected to slow down during this uncertain period.

Many law firms, estate agents and brokers experienced a dip in the market and properties when Brexit was announced, and since, the property world has been moving at a rather glacial pace. Although Article 50 hasn’t impacted the transactional work and processes of conveyancing, the fear factor has come into play, with many not proceeding with transactions for fear that they will lose out owing to the changes that Brexit will bring into effect. The Snap Election has also caused buyers and sellers to reconsider their transactions as they would hold no certainty as to whether the incoming cabinet will impose more restrictions on their activities.

Landlords and investors are hesitant to expand their portfolio due to the uncertainty regarding mortgage relief and stamp duty implications. The changes to stamp duty were brought about in April this year, where a 3% surcharge on additional dwellings is now payable. There has been great uncertainty about relief available. However, it is always worth clarifying as the position is a mine eld. It has been surprising to note a number of Landlords who are still not aware of the higher rate stamp duty land tax implications, whilst others have accepted that this is an unenviable hurdle and look at saving costs elsewhere. Former Lord Chancellor Lamont described this change as ‘unbalancing’ for the British Tax System, and many believe this holds true.

It should be noted that another area in which Landlords could previously claim relief has also been impacted. Tax relief on buy to let mortgage payments has been slashed so Landlords are finding it increasingly difficult to find relief. As a result they are more hesitant to expand their portfolio. It is important not to panic however, as there are solutions available in the form of switching your mortgage or considering placing your properties in a limited company structure.

In each of these instances though there are potential drawbacks that you need to be aware of.

Whilst is seems that purchases may have dipped momentarily it also appears that clients have considered staying put and investing in their homes. We have noted an increase in the number of re-mortgages, which are at their highest in 8 years. Many believe that this is owing to lower rates and monthly repayments offered by the banks on re-mortgages, and some have attributed it to the fact that more people are looking to keep hold of their properties for longer, and release equity so that they can fund another property purchase. We have also noted that a number of Leaseholder clients are now looking at extending the terms of their lease to make it more marketable.

For more information on the legal considerations surrounding the current UK housing market, you can get in contact with Indu (indu@sethi.co.uk) and Jem (jem@sethi.co.uk) directly on 020 8866 6464.