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Buy let stamp duty could make investment unviable for new entrants in UK
The extra 3% stamp duty tax being levied on buy to let and second home buyers in April 2016 means that it may no longer be financially viable for new entrants to the lower end of the private landlord market, it is claimed. And the new tax band will have a disproportionate impact on pensioners looking to generate revenue in retirement, according to Chestertons, one of London's largest estate agents. The announcement of the additional levy on second homes and buy to let purchases came as a surprise announcement in the Chancellor's Autumn Statement, and initially caused some confusion across the industry as pundits disagreed on how the additional 3% would be applied. Chestertons has now calculated that the extra duty will hit the lower end of the market more heavily in terms of a percentage increase than it will the higher end. A buy to let property acquired for £150,000 attracts stamp duty of £500, but under the new regime it rises to £5,000, a tenfold increase. By comparison, an investor buying a property for £1 million currently pays £43,750 in stamp duty, while the new rate will be £73,750, less than double the original duty, although of course a larger amount in cash terms. ‘The Chancellor claimed that this change to stamp duty would prevent wealthy investors and overseas buyers from pricing first time buyers out of the market, but as usual the devil's in the detail,’ said Nick Barnes, head of research at Chestertons. ‘What we can now see is that this change is likely to completely deter many first time landlords from getting into the private rental market in the first place, including pensioners looking to wisely reinvest their precious pension pot,’ he pointed out. ‘ The obvious effect of this will be that there may well be a significant number of smaller landlords deterred from entering the sector altogether. Those who remain will have their margins slashed and, on top of the increasing regulatory burden and the planned reduction in mortgage interest relief, they may have to raise the rent in order to make the numbers stack up. Either way, the already highly competitive private rental market is about to get a whole lot more so,’ he added. According to Robert Bartlett, chief executive officer of Chestertons, the industry had hoped that the Chancellor might have announced stamp duty change that would have helped the current negative impact on sales above £1 million. ‘We'd hoped he might consider capping rates, or reducing them by 3%, so you can imagine the dismay when this extra surcharge was announced. The buy to let sector has become an essential part of the UK housing landscape and we urge the Chancellor to think clearly around the rules for when this is being introduced,’ he said. He pointed out that a number of key questions still need to be answered, for example whether a buy to let investor who has contracted… Continue reading
UK home buyers make their mind up about a property quickly, research suggests
Britain is a nation of decisive home buyers who are quick to fall in love with a home and act fast to buy it, according to a new survey. Some 61% of home owners were able to buy the home they originally fell in love with and 25% were lucky enough for this to be the first home they viewed. This highlights the decisive nature of British home buyers, according to the survey report by conveyancing services firm My Home Move. The research also found that house hunters know extremely quickly whether they like a property with 26% making the decision to buy their home even before viewing the whole property. It also found that 18% make the decision within 30 seconds of entering the property and 8% knowing the property is for them before even entering. In contrast, 17% needed a second viewing to decide it was the home for them. On top of this the survey shows that 45% of buyers did not have to make any sacrifices or compromises when buying their home and are therefore living in their dream home. However, first time buyers and those in London are more likely to come to a compromise when buying a home with 11% finding it much harder to find their dream home and having to view 10 or more properties before finding the right one. The research also found that 39% had a perfect home that ‘got away’ and were not able to buy the property they originally fell in love with, and this was more likely to happen in London were 60% were disappointed in this way. Buyers in London were also more likely to make sacrifices or compromises when choosing their home and 70% said their current property did not have everything they wanted, compared to only 55% for Britain as a whole. The report suggests that this is due to the high demand and shortage of properties for sale in the capital, alongside rocketing prices, meaning buyers in London have fewer options to choose from. This also contrasts with other parts of the country, such as the North West, which saw only 44% having to make any sacrifices or compromises. First time buyers were worse hit by this reality when buying their home, with a significant majority of 83% aged 30 or below saying they had to make sacrifices or compromises when buying their home. In comparison, only 43% of home buyers aged above 51 said their home did not have everything they wanted. The most common reason home owners were not able to buy a property was being outbid by another buyer. This happened to 27% of buyers, and is much more likely among first time buyers than older home owners, with 41% of those aged under 30 being outbid, dropping to 26% or less for those aged above 51. Continue reading
Downsizing is seen as too expensive for many retired home owners in UK
Downsizing is not an option for many home owners in the UK, with stamp duty, legal costs and move costs discouraging people from moving to a smaller property, new research shows. The average equity release customer has lived in their home for 21.8 years before cashing in on their property wealth, says the analysis from over 55s retirement specialist Key Retirement. But pensioners in London own their homes for nearly 26 years before accessing the wealth and the report also reveals that nearly one in three who release equity have lived in their homes for 30 years or more. The firm believes this illustrates why, for many, downsizing is simply not an option. Indeed, home owners who bought in early 1993 have seen average UK prices rise from £60,850 to around £203,800, a rise of nearly £143,000, while Londoners buying in 1989 will have seen average prices rocket from £96,130 to around £408,000 giving them gains of around £312,000. Retired home owners trying to downsize to release wealth typically face stamp duty of 2% on the proportion of a home’s value over £125,000, rising to 5% for the proportion over £250,000. ‘Stamp duty, legal and removal fees and the cost of turning their next house into a home make downsizing an expensive option for many,’ said Dean Mirfin, technical director at Key Retirement. ‘The upheaval and risks of losing touch with friends and family as well as local services, including healthcare, can all impact negatively on the decision to move, as well as the fact that these homeowners are very attached to their homes, which they have invested in for many years,’ he added. Cost and other issues aside, the difficulty of finding a suitable home to move to is cited by many as a key driver in them wanting to stay put and reinvest in their current property, many choosing to future proof their home to be suitable for them as they age, the research also suggests. Market analysis shows the number of homes for sale has slumped to a record low in November adding to the struggle for older homeowners to find a suitable home to move to. ‘Downsizing is logical and sensible and should work in theory for many but turning the theory into practice is tougher than it seems and the theory overlooks a wide range of issues that are important to retired home owners,’ said Mirfin. ‘Equity release customers are accessing an average of nearly £75,000 from their property wealth without having to tackle the financial and emotional issues involved in moving home. The average customer has owned their home for nearly 22 years and has clearly benefited from house price growth but prefers to stay in their house rather than going through the upheaval and costs of moving,’ he explained. ‘Until we are building the right sort of properties and in the right quantities both the math and availability to facilitate downsizing remain a huge challenge,’ he added. Continue reading
