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In recent months, several significant developments have reshaped the UK property landscape, impacting everything from homebuying costs to prime central London prices and investment opportunities along the Crossrail line. This summary delves into the key changes and trends shaping the market, offering insights for prospective buyers, investors, and industry stakeholders.

Homebuyers Face Higher Costs with MDR Abolition

 Starting June 1, the abolition of Multiple Dwellings Relief (MDR) will lead to higher stamp duty taxes for those purchasing homes with annexes or multiple dwellings. This change is expected to significantly impact the housing market, particularly for properties with additional accommodations. House builders, industry bodies, and investment firms have warned that removing MDR could stifle the market for buying and investing in blocks of flats, potentially resulting in 13,000 to 25,000 fewer homes being built. Critics argue that this policy shift will drive up home prices and limit housing options.

 Despite the potential drawbacks, the Treasury anticipates raising £385 million annually by 2028-29 due to the MDR abolition. Some buyers have rushed to complete transactions before the deadline, aiming to save on tax costs.

 Mallorca’s Proposed Five-Year Residency Rule

 In Mallorca, a proposed five-year residency rule is causing unrest among UK expats and potential tourists. Aimed at reducing speculative buying and ensuring long-term commitment to the region, this regulation could significantly impact those looking to make Majorca their home. The island has seen recent protests against tourist overcrowding and calls for more affordable housing, highlighting tensions between the tourism industry and local residents.

 While these measures might reduce tourism revenue and pose challenges for local businesses, they could foster a more sustainable and balanced approach to tourism in the long run. The future of Majorca’s travel landscape remains uncertain as these changes are debated.

 Interest Rates and Economic Outlook

 With the Bank of England’s rate decision on June 20 and the General Election on July 4, the UK’s economic outlook is under close scrutiny. Investec Chief Economist Philip Shaw notes that recent economic data does not strongly support a cut in the Bank rate. Despite a drop in Consumer Price Index (CPI) inflation to 2.3% in April, services CPI inflation and private sector pay growth indicate persistent inflationary pressures.

 Updated inflation and wage data will be released before the next Monetary Policy Committee (MPC) meeting. While these figures might be more favorable, they may not fully meet the committee’s expectations. The Bank of England, operating independently of the government, is likely to keep the Bank rate at 5.25% in June, with potential rate cuts beginning in August.

 Investec forecasts that as inflation pressures ease, interest rates will gradually decline. The Bank rate is expected to fall to 4.75% by the end of 2024 and to 3.75% by the end of 2025. Changes in the Bank rate influence various financial market interest rates, notably affecting fixed-term mortgage rates and savings rates.

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