Is the UK housing market slowing down?
By Joe Harker
The UK housing market is experiencing a few difficulties, particularly in London and the South East of England. The difficulties could lead to a larger problem, or they may simply be a minor blip.
The slump could be due to Stamp Duty, the tax paid when purchasing a house. Stamp Duty does not apply to houses worth less than £125,000 and operates on a sliding scale for more expensive property, rising to 12 per cent for houses costing more than £1.5 million. Since many properties in London and the South East are worth a lot of money they are most affected by Stamp Duty. Simon Rubinsohn, Chief Economist at the Royal Institution of Chartered Surveryors, said: "There has been a recent series of tax changes but this is only part of the story. Lack of new build in the wake of the financial crisis is a more fundamental factor weighing on the market."
The Guardian reports that the slowdown is due to political uncertainty. They report that surveyors believe the market will be flat for the next year, and housing market activity has returned to levels last seen in 2011. The Royal Institution of Chartered Surveyors said: "Record low stock numbers, political uncertainty and the aftermath of tax changes are obstacles hindering the UK housing market, with price growth and sales activity subdued during the month of July."
The BBC reports that the lull is spreading from London to the South East, but Northern Ireland, the West Midlands and the South West are all seeing prices continue to rise. It would appear that London and the South East are pulling down the national average, so the slump in the housing market may be localised in a few locations around the UK. Despite the bad news from London and the South East, house prices are "quite firmly on an upward trend".
The housing slump in some areas of the UK could simply be a seasonal issue that will subside soon. Brian Murphy, Head of Lending at the Mortgage Advice Bureau said: "It should also be remembered that, where reported, a slight lull in activity in July is seasonally expected, and therefore no cause for alarm, given that we're in peak holiday season and many are putting their moving plans on hold to take their hard earned break.
"This isn't an indictment on the market - it's just what happens at this time of year and should be viewed in context."
Is the UK housing market really struggling, or will the lull subside soon?