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UK residential property tax changes widely welcomed
Sweeping reforms to the Stamp Duty Land Tax (SDLT) in the UK have been announced which take effect immediately and will mean many people, especially first time buyers, will pay less property tax. The reform announced by the Chancellor of the Exchequer George Osborne abolishes the previous archaic bandings with a more progressive system designed to help young professionals and families get on the housing ladder. The new charge will only apply on a portion of value that is above each new level. So there will be no SDLT up to £125,000, 2% up to £250,000, 5% up to £925,000, 10% up to £1.5 million and 12% over £1.5 million. Osborne pointed out that only on purchases of more than £937,000 will buyers end up paying more than they have done. It is also likely that the chances of a mansion tax should be introduced are much diminished. The move has been widely welcomed by the property industry with experts saying it was long overdue. ‘The abolition of the archaic slab system will take the sting out of the tail for thousands of buyers on the lower rungs of the ladder. The new graduated system should help brighten the UK housing recovery in regions outside of London, where property prices are still battling back to pre-recession levels,’ said Peter Rollings, chief executive of Marsh & Parsons. But he pointed out that it will add to the weight of the tax burden shouldered by those buying more expensive homes. ‘In prime parts of London, where 56% of property is worth £1 million or more, this will impact a significant proportion of ordinary working families,’ he said. But he also said that he expects any additional strain on the top tiers of the housing market to be absorbed, and the natural rhythm of the property market won’t be disrupted as buyers investing in prime London property are accustomed to having to pay a higher price than elsewhere across the country and the unparalleled returns and capital growth on offer more than make it worthwhile, so demand won’t be quashed. ‘London property taxes have historically been cheaper compared to other world cities, so this overhaul brings it into line with rival global centres of investment and although, one-off purchase costs are always a bitter pill to swallow, it won’t deter people from snapping up their dream home in a desirable location. Buyers will soon adjust and it will simply become the norm,’ he added. Peter Mackie, senior partner at independent buying agents Property Vision, pointed out that the change will help 98% of people trying to get onto the property ladder but the impact of the changes will be greater at the lower end of the market where buyers rely on borrowed money, rather than the higher end where if a buyer can afford to pay cash for a £50 million house they can afford the Stamp Duty. ‘The increases in Stamp Duty over £1.5 million… Continue reading
First time buyers and renters in UK underestimate their outgoings, research finds
The majority of first time buyers and renters in the UK underestimate their monthly outgoing by almost £200 a month, suggesting they could have problems if their income reduced. Only 14% of first time buyers and renters are able to accurately calculate how much their outgoings will be from the outset, according to ongoing research from discount online firm VoucherCodesPro. It polled 1,673 people aged 18 to 30 from around the UK, each of whom had either bought their first home or rented a property for the first time in the last six months. Respondents were asked about their bills in the early stages of living in their property. Everyone taking part was asked ‘When taking into account the first month after you’d moved in to your current property, did you underestimate, overestimate or accurately calculate what your monthly outgoings would be for bills?’ The majority of respondents, 63%, said they underestimate how much their first round of monthly bills would be. When these people were asked how much they’d underestimated the amount by, the average answer was £198. When asked what bills they’d underestimated, specifically, the most popular answer was 42% gas and electricity, 27% water and 21% entertainment and television. Some 23% of the total respondents said they had overestimated how much their monthly outgoings would be in the initial stages of living in their home, with the average overestimation figure being stated as £167. Just 14% of the respondents said they accurately calculated how much their bills would cost them from the outset. When told to take into account their financial situation at the time of the poll, respondents were asked if they ‘lived comfortably’, ‘just managed to make ends meet’ or ‘struggled’. The majority, 54%, said they ‘just managed to make ends meet’, whilst 31% said they ‘struggled’ with the cost of living and 15% said they ‘lived comfortably’. ‘Moving out of home into your own place for the first time can be a bit of a learning curve, especially when it comes to bills,’ said Nick Swan, the firm’s chief executive officer. ‘Managing your money correctly and making sure you’ve accurately worked out how much everything is going to cost you is really important. When setting budgets and working out the cost of bills, it’s always best to overestimate and then you can put an excess into savings,’ he added. Continue reading
More transparency and communication needed in property leasehold sector
Property managers should not be subject to more formal regulations by the government but there needs to be more transparency and communication in the leasehold market, it is claimed. The Competition and Markets Authority (CMA) has, however, made a number of recommendations as a result of its market study into the residential property management services sector in England and Wales. It had consulted extensively with consumer groups, leaseholders, the industry and government during the course of the study and found that overall while the market works well for many leaseholders, some have experienced significant problems in a sector where total annual service charges are estimated at £2.5 to £3.5 billion. The issues identified include leaseholder frustration at a lack of control over the appointment of property managers, high charges for services arranged by property managers or poor standards of service. It also found leaseholders suffered unexpected costs and were being charged for works they consider unnecessary, poor communication and transparency between property managers and leaseholders, and difficulties in getting redress. The CMA has also identified some concerns about prospective purchasers’ understanding of leasehold, and their obligations and service charge liabilities for leasehold flats. In light of its findings and on-going developments in the market, the CMA has made a number of detailed recommendations aimed at improving prospective purchasers’ awareness of leaseholders’ obligations. It also wants to improve disclosure, transparency and communication between property managers and leaseholders and leaseholders’ access to appropriate forms of redress. It says that these recommendations will make leaseholders better informed about the responsibilities and performance of property managers, while greater transparency will increase pressures on property managers and landlords to take account of leaseholder interests. They will also provide improved mechanisms for dispute resolution, should issues arise that require action. The CMA is also recommending changes to legislation affecting rights of consultation relating to major works, as well as supplementing the existing Right to Manage legislation to enable leaseholders, where there is a majority in favour, to require the landlord to re-tender the property management of their block. The CMA is not recommending that property managers should be subject to more formal regulation by government. It says that for many the market works reasonably well, and satisfaction levels are particularly high where leaseholders have exercised their Right to Manage. It adds that existing legislation provides significant protections for many leaseholders, and the sector has engaged constructively with the CMA during the course of its study, recognising that there are improvements to be made and showing a willingness to address the issues that have been identified. ‘Many property managers provide a good service to leaseholders, but protection against the worst failures by property managers is vital because when problems do occur they have a major impact on leaseholders,’ said Rachel Merelie, the senior director at the CMA who led the study. ‘We are pleased that within the sector there is a consensus that change is needed and a genuine willingness to be part of that change. This is evidenced… Continue reading
