Despite all the efforts to make the housing ladder an easier prospect for those trying to get on it, recent figures indicate that with prices continuing to move upwards the UK’s house buying bubble is still very much in tact.
A survey by the Royal Institution of Chartered Surveyors (RICS) found that the numbers of properties coming onto the market fell for a fourth consecutive month in April, shrinking further the choice available to buyers and giving sellers more scope to increase asking prices.
Whilst the RICS survey found that there was a little evidence of slow down in London - where buyer enquiries were marginally less - overall, rising house prices are set to be the standard over the summer in the UK. This corresponds to the most recent survey by the Nationwide, which found prices rising 11% across the UK and 18% in London.
Back in March when the Budget was announced, there was an even more interesting prediction that house prices across the country could shoot up by some 30% over the next five to six years as people attempt to protect themselves in retirement by putting money into property, rather than into poor value pensions. This followed on from a change announced in the Budget that means that there will be no forced annuity on retirement and that the money saved can be used in any way that the pensioner wants to use it. Many experts are predicting that this change will drive cash to be taken out of pensions and invested into property instead, further increasing the demand in an already tight market.
Of course this could have a number of consequences for those involved in the housing market at various levels, including making it more expensive to buy a first home, making it more difficult to move up the housing ladder and ensuring that sellers receive much more for properties than they would have previously.
It also opens up the question of a potentially significant increase in the numbers of people paying inheritance tax as properties are passed from one person to another when the original owner is deceased. The higher the value of the property, the more inheritance tax is likely to be due on it. With the current nil rate threshold for inheritance tax set at £325,000 and the average price of a home in the UK coming it at £253000 there is very little room for prices to rise further before even the average UK home will incur inheritance tax. In London the average price of a property is £458,000 so this threshold is already irrelevant for those who live in the capital.
Given the predictions for house prices in the near future, it’s advisable for anyone with a high value property – or even one that just inches over the threshold – to start taking steps to insulate it from inheritance tax liability. Without this kind of preparation it’s likely that a large proportion of all that extra accumulated value could end up in the hands of the taxman.