2010 has been a waiting game for the housing market. Pre-election many housing experts and prospective buyers were unsure how the economy was going to be affected by a possible change of government. The scrabble for power and subsequent compromises by our coalition government has continued this uncertainty. Now the Chancellor has delivered his emergency budget we have had time to review and analyse its effects. What are our predictions for the local housing market in Cornwall?

Capital Gains Tax

This has come through lower than expected, a relief for many top rate tax payers who own second homes. For the basic tax rate payer this tax remains the same as it was previously. At first glance this may appear generous but in reality the capital gains made on a property is likely to tip these tax payers into the higher tax paying category.

Overall this should not have a dramatic effect on the property market. The worst to be hit will be long term owners of second homes and rental properties who have gained substantial capital during their ownership.

A more worrying change is the open nature that the Chancellor has left for capital gains tax. Experts are suggesting that further increases could be expected in 2011. Many second home owners will need to analyse their options in detail now bearing this possible change in the future. They may consider it wise to cash in their assets now.

House Price Trends

The latest figures from the Land Registry have noted a small drop in house prices by 0.2% in May, the first drop that has been seen since April 2009. This is not reflected in all areas with Wales being the worst hit and the South East and London continuing to rise. In other regions such as the South West reports have noted that the housing market is continuing to look buoyant. Cornwall’s average house price has changed from £175,541 (May 2009) to £190,556 (May 2010).

Cornish House Price Trends

Cornwall’s house price trends tend to be distorted as a result of the high number of holiday homes in many of the areas. Historically this has inflated house prices above normal levels, leaving affordability a dream for many locals.

Whilst it is too early to fully see the effect of this recent budget, Cornwall’s changes will be accentuated due to the high percentage of second homes. There may well be a healthy number of second homes coming onto the market in the area, helping to balance the housing stock in the region. This will mainly be affected by second home owner’s long term interpretation of capital gains tax changes and how this fits in with their personal circumstances. We will have a truer picture towards the end of the summer as to how the trends will continue in 2010.

We hope continued stability will hold on in the South West, fuelling confidence in ‘normal’ house selling and purchasing. Confidence in this kind of market will help developers, buyers and sellers plan their housing needs and for financial institutions to keep lending for those all too important mortgages.