Looking Back – Property Week in Review

Yet another week brings fresh warnings of an impending house price crash, and this time, the alarm bells are ringing with new data from Halifax. Let’s dive into the situation and address the reasons for concern.

In a noteworthy turn of events, house prices experienced a decline last month, marking the first drop in over a decade. Commentators have seized upon this as evidence that storm clouds loom over the market, forecasting further gloom. But are these concerns well-founded?

Undoubtedly, the housing market finds itself in a precarious position. The repeated interest rate hikes, expected to persist through the Summer, have certainly not aided the situation. However, can we confidently declare that a crash is imminent? Frankly, I don’t believe we can.

The reality reveals two key factors at play. Firstly, we are witnessing a necessary readjustment following the significantly inflated house price rises witnessed during the pandemic. Secondly, the market is reacting to the prevailing economic environment, leaving homeowners apprehensive as rising costs assail them from all sides.

Given the current circumstances, many individuals find the prospect of moving too risky. As long as this sentiment persists, prices are likely to continue their descent. However, even if prices continue to decrease at the current rate, it would not spell disaster. Think of it more as rain clouds rather than a full-blown storm. The market has endured darker times before and will navigate through this adjustment.

Storm in the Rental Sector

What concerns me even more at present is the state of the rental sector, where the storm is brewing. Landlords are departing in record numbers, driven by climbing interest rates, tightening regulations, and soaring maintenance costs. Recent reports indicate that hundreds of thousands are poised to sell their properties, confirming what I’ve been hearing firsthand.

As rates rise and costs escalate, landlords are making the decision to exit the market, particularly since they would be leaving near the peak of the sales market. Unfortunately, this translates to a challenging time for tenants, making it far from an ideal moment to be seeking rental accommodations.

The Inheritance Tax Debate

The latest topic that caught my attention revolves around the perennial debate on whether inheritance tax (IHT) should be abolished. As expected, this subject sparks lively discussions whenever it resurfaces.

Undeniably, inheritance tax exerts its influence on the UK property market, albeit within a broader context shaped by multiple factors. It can impact property prices, influence investment decisions, affect family homeownership dynamics, and drive estate planning strategies. However, it’s crucial to acknowledge that IHT is merely one piece of the puzzle, with other economic factors and market conditions also playing significant roles in shaping the property landscape.

When it comes to tax policies, finding the delicate balance that encourages economic growth and fairness is essential, while considering the potential consequences for homeowners and the broader market. Understandably, IHT tends to be favored by those who do not bear its burden, while those liable for it often resent the tax.

Taxing the estates of individuals who have likely paid taxes throughout their lives to accumulate the wealth now subject to IHT can be viewed as grossly unfair. Nonetheless, the government requires a certain amount of revenue from the population to fund vital services like the NHS, defense, schools, and transport infrastructure.

The question that arises if IHT is reduced or abolished altogether is: Who will bear the additional burden to compensate for the resulting shortfall? Relatively affluent individuals who have passed away and no longer require their wealth may seem like an easy target, and they are unlikely to voice complaints.

However, much like predictions of a house price crash, the actual elimination of this tax by ministers remains something I’ll believe when I see it.

Jonathan Rolande

Jonathan Rolande (MNAEA MICBA MARLA) began in the property business in the late 1980’s and is a Director of House Buy Fast and helped to found The National Association of Property Buyers in 2013. He has worked closely with The Property Ombudsman to develop a Code of Practice for Residential Property Buying Companies.