Brexit and property taxes lead to subdued forecast for 2017 market

Brexit and wider economic uncertainties worsened by changes to property taxation have forced the Council of Mortgage Lenders to cut its forecast for next year's housing market transactions from its original 1.26m prediction to a revised 1.17m.

The CML says the change is “partly relating to the economic uncertainty from the EU referendum but also because of tax and regulatory changes in the housing and mortgage market”.

This refers to the raft of measures introduced in recent months and for the near future including the additional homes stamp duty surcharge, stricter lending criteria for all borrowers, and the imminent cuts in landlords’ mortgage interest tax relief

The organisation’s forecasts for the year just finishing have proven relatively accurate: it predicted 1.25m transactions and £237 billion in mortgage advances, and the actual figures are anticipated as being 1.23m sales and £246 billion of lending.

“The housing market is relatively well insulated from direct Brexit effects as most activity is driven domestically, but it is not immune from more generalised economic uncertainty. And we expect any modest strengthening in home owner lending to be rather offset by a less active house purchase market in buy to let, as both tax and regulatory changes bite on landlords” says Paul Smee, CML director general.

“Overall, the mortgage market remains resilient but is likely to plateau rather than grow much for the next couple of years. Gross lending is likely to hover around the £250 billion mark in 2016, 2017 and 2018. Property transactions look set to drift down slightly, although we do not expect house prices to fall, and net lending seems unlikely to get above £30 billion next year” he adds.

The CML now says that in 2018 there will be 1.155m transactions - very slightly lower than next year’s predicted market.