Tax cuts, mortgage rate changes - PLUS your Welsh property market latest

Latest: Land Transaction Tax cut, interest rates have increased and house prices have fallen. Here’s the very latest from the property market in Wales...

Finance Minister Rebecca Evans announced some fantastic new measures for buyers in Wales. Anyone buying a property for less than £225,000 will now pay no tax. The threshold for paying Land Transaction Tax is being increased from £180,000 to £225,000 and the change will come into force from 10th October.

There have also been some gloomy headlines of late, talking about the “end of the house price boom” or "house prices drop for the first time this year". However, many of these publications failed to mention that these stats were talking about asking prices rather than actual selling prices. As it turns out, asking prices always dip in the summer – and, according to Rightmove, the August dip of 1.3% was exactly in line with the 10-year average.

So, what is the latest on the property market? How will the LTT cuts in Wales affect you? What’s going on with mortgage rates? And what exactly is happening with house prices?

Here’s all you need to know…

What exactly is Land Transaction Tax? 

LTT (Land Transaction Tax) is payable when you buy a property or land over a certain price threshold in Wales. The current LTT threshold is:

• £180,000 for residential properties (if you do not own other property)
• 225,000 for non-residential land and property

How will the tax changes benefit you?

Finance Minister Rebecca Evans said: “This is a change tailored to the unique needs of the housing market in Wales and contributes to our wider vision of a fairer tax system. 61% of homebuyers will not pay tax on their purchase. These changes will get support to people who need it and help with the impact of rising interest rates.” So, anyone purchasing a property in Wales for under £225,000 will now pay no tax. Anyone buying a home costing less than £345,000 will see a reduction in the tax they pay, up to a maximum of £1,575. This is great news for anyone thinking of entering the housing market or moving home.

What’s happening with UK house prices?

UK house prices increased by 8.3% or £19,800 in the past 12 months*. The South West and Wales are jointly the best performing regions, with annual house price growth of 10.6%. Strong demand from buyers and lots of new sales being completed has helped the high rate of house price growth in these areas. New sales agreed remain in line with last year while stock levels have started to slowly increase after being incredibly low in recent months. It’s always worth getting an up to date valuation to see whether your property is worth more than you think…

Average two-year fixed mortgage rate goes above 4% for the first time in nearly a decade**

The financial data provider Moneyfacts stated that the average new two-year fixed rate has increased by 0.14% since the start of August, and now stands at 4.09%. This is the first time that rates have broken through 4% since early 2013 and it adds to the dilemma faced by many buyers. It’s also 62% more expensive than it was the same time last year, when it was at 2.5%.** If you’d like to learn more about how to choose between fixed rate mortgages, head here.

House prices did fall 1.3% in August

According to Rightmove, the average price of property coming to market dropped by 1.3% in August* (-£4,795) to £365,173. This is the first price fall of the year. However, before we all start worrying about the decrease, it’s important to mention that this is very usual for this time of year. Traditionally prices do fall in August – it’s the time of school holidays, so moving home is less of a priority. People tend to wait until autumn to start thinking about moving again. Some of the more urgent sellers who are coming to market are therefore pricing more competitively in order to capture the attention of a suitable buyer quickly.

Have interest rate rises affected house prices?

The seventh consecutive base rate rise, this time by 0.5% to 2.25%, will no doubt be in the minds of many home-movers. It’s likely that the impact of these rises will gradually filter through during the rest of the year, but at the moment they’re not having a serious impact on the number of people wanting to move. There’s still strong buyer demand and a lack of stock available, which is keeping house prices high.***

Will the cost of living cause house prices to fall?

It may feel surprising that sales market activity is not weakening faster, given increases in the cost of living, rising interests and a drop in UK consumer confidence. Rising inflation and the rising cost of living are hitting those on lower incomes first and will take longer to impact higher income households.

Low supply of rental properties as landlords exit the buy-to-let market

There’s also research to suggest that landlords are leaving the buy-to-let market. Research suggests that the attraction of the private rental sector is waning*** due to an increase in regulation and rules, thus reducing the supply of much needed private rental homes. Tax hikes in recent years, including the extra 3% stamp duty surcharge on second homes and the changes to mortgage relief are driving away many landlords. If you are considering becoming a landlord, the thinning private rental sector means there’s high tenant demand but not many properties. This could be a great opportunity, if you know what your property could rent out for…

Landlords put greater focus on energy efficiency in their investments

If the new EPC proposals go through, the minimum ratings for EPCs will rise from an E to a C rating by 2025. Investors are adapting their current investments to help to counteract the hike in the cost of living. Investors are also looking to make improvements to their properties – solar panels and draught proofing in order to increase property values. If you’d like to learn more about how to save money and how to make your property more energy efficient, head here.

New rules in place from 1st October regarding mandatory smoke and carbon monoxide alarms

There are just a few weeks left before landlords – or their agents – must meet the mandatory requirement of fitting smoke and carbon monoxide alarms to their rented properties. The rules state that all rental homes in England must provide a carbon monoxide detector in rooms used as living accommodation where there is a fixed combustion appliance, such as gas heaters and boilers, by 1st October. This is also the case for fireplaces and log burners.

So, is now a good time to sell?

Something for you to factor in is when you would like to sell up and move. Remember that conveyancing can be a lengthy process and means sellers need to come to market soon if they want to move early in the new year. We are currently still seeing a continued surge in the volume of new buyers looking to purchase the limited housing stock available, and so we would encourage anyone thinking of selling to take advantage of this key window of opportunity, now.

Sources: https://justdoproperty.co.uk/is-it-better-to-invest-in-shares-or-property/
*https://www.gov.uk/stamp-duty-land-tax
**Rates quoted are correct at time of publishing article (September 2022) and can be subject to change or be removed at short notice. https://www.thisismoney.co.uk/money/mortgageshome/article-11134241/Average-two-year-fixed-mortgage-rate-goes-4-time-nearly-decade.html
***https://www.rightmove.co.uk/news/articles/property-news/house-prices-fall-first-time-2022/
****https://propertyindustryeye.com/investors-are-rethinking-their-strategy-and-moving-away-from-buy-to-let-property/

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