12:09 PM, 5th August 2016, About 5 years ago 5
From the May Inflation Report, the planned 3% surcharge on stamp duty for second homes in April caused some housing transactions to be brought forward. Therefore the sharp fall in property purchase completions in the second Quarter of 2016 was anticipated (see Chart 2.4).
House price growth also slowed over the past few months with Quarter 1 growth 2016 at 2% and Quarter 2 growth falling to 2%.
The Bank of England forecast a further fall in the volume house of house purchases and a slow down of house price inflation (see Chart 2.5).
The most recent RICS housing survey showed a decline in house price and sales expectations for the next Quarter along with a significant fall in new sales enquiries and selling instruction in the last Quarter.
Pre-referendum and the following Brexit uncertainty are noted as factors by the Bank with large purchase decisions likely to be deferred by reduced Household confidence on future income levels and lower expectations for housing market price growth.
The Bank anticipates that its stimulus to credit supply by way of the Term Funding Scheme should support continued housing demand even though it may be subdued in the medium term and even a small drop in house prices short term.
The proportion of existing owner occupiers moving house has remained low since the financial crisis in 2008, despite improvements in credit supply, and appears to be an ongoing trend caused by an increasing average age of the population.
Housing Market conclusions:
Decreasing housing market purchase activity and weaker confidence are expected weaken investment in the short term. This will subdue spending on services associated with property transactions.
As in previous trends, weakened confidence in the housing market is expected to cause a fall in new house building investment.
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