Will We See A Return To Gazundering?
There appears to be a lull in the housing market with the practice of gazundering to hit sellers in 2015. Gazundering is the term used when a buyers reduces their offer on the day of exchange and refuses to go ahead if the vendor does not accept. This happened a couple of years ago and can be a total disaster for homeowners trying to move.
Having already spent thousands of pounds on legal fees and survey costs they find out on the day of exchange that their buyer will not go ahead unless they reduce the purchase price by £10,000. This has repercussions for everybody if that chain and in some cases can cause a chain to collapse with the end result that three or more sales can fall through.
This only happens when we are in a buyers market and there are some predictions that we could enter that territory in 2015 particularly as we head towards the election in May. It is normal for the property market to slow down in an election year but this year could be worse because we have seen meteoric house price increases over the last few years and buyers may sit on their hands and wait for house prices to come down.
Matters have not been helped by the fact that it has become much harder to get a mortgage with the Bank of England placing much more emphasis on the ability of borrowers to afford a loan. They have done this by tightening up lending criteria and forcing banks and building societies to be more stringent mortgage applications.
Lending fell by 7% in quarter to December
There are still a shortage of homes coming onto the market which may prop up prices in the short term but a lack of buyers will mean that sellers may have to reduce their asking prices. 2015 could be a tricky year for vendors and it is possible that prices could drop across Britain. Although Rightmove said that record numbers of buyers visited their website in December recent figure released from the council of mortgage Lenders said that lending fell by 7% in the quarter to December. much of this was down to the new constraints placed ob buyers by the new mortgage rules but these rules are still in place and will be kept in place as a way of reducing demand and limiting house price inflation.
If I were thinking of selling this year I would be looking to get my house on the market now as there may be a rally in the short-term but the market may wobble in April and May and may not get back on track again through 2015. Experts have already said that the economy could still face lots of new challenges from the global economy as many of our trading partners are still struggling and this will have an affect on us.
The government has propped up the housing market over the last few years but they may not be prepared to continue on this course at the beginning of a new term of government. They ave been sweetening us up over the last few years because they want our votes and may change curse as soon as they are re-elected if they are indeed re-elected.
Stamp Duty reforms may affect London house prices
The London property market could be a casualty because prices are still very high and the new stamp duty changes introduced by the chancellor. The radical stamp duty reforms really hits buyers at the upper end and is punitive above the 1.5m mark.
It is likely sellers in this price range could be subject to gazundering as buyers look to save money. Sellers will really have to think about how much they want to move if a seller decides they want a price reduction of £100,000. Whilst unlikely to be introduced by the Conservatives a mansion tax would have a damaging affect on houses over £2m. It is clear that the Liberal democrats along with the Labour party would like to introduce a mansion tax which would reduce the demand for this end of the market.
No matter what your politics are it seems somewhat out of date that a householder in a £2m home should be paying the same council tax as a family in a house worth £750k. Maybe it is only a matter of time before this happens even if it causes some hardship for older people living in homes that were bought many years ago.
Many of these homeowners are assets rich but not cash rich. This may force many homeowners to sell their homes because they can’t afford to pay the mansion tax. This is also unfair and perhaps the government of the day will only apply the mansion tax to home owners that have bought their homes over the last five years will have to pay.