Tag Archives: finance
Stamp duty increase for UK landlords equivalent to 11 months net income
The cost of the new 3% stamp duty rate for UK landlords announced recently in the Autumn Statement would be the equivalent to 11 months income for the average mortgaged landlord, new research has found. It is suggested that most private sector landlords buying after April 2016, when the measure is introduced, will likely try to offset the cost by offering less when purchasing. It comes at a time when the rent on newly let properties has increased by 2% year on year, led by markets in the East of England, according to research by property services group Countrywide. In the Autumn Statement, the Chancellor George Osborne announced an additional 3% stamp duty rate for landlords and second home owners. The research also suggests that the rate will put pressure on yields for landlords, unless they account for increased costs when buying. Indeed, the research shows that if the higher tax burden is not factored into the purchase price of a property, it would mean a reduction in gross yield of 0.2%. That is equivalent to 11 months income for the average landlord, taking into account borrowing costs, based on the average loan to value of 68%. Landlords in the South West and North East of England will see the highest cost relative to rental income, as the extra tax burden is equivalent to 14 months and 12 months of income, respectively. Those buying in the North West of England will see the least, with the extra stamp duty equivalent to eight months of income. The majority of landlord purchases take place in London, the South and East of England and some 60% of homes sold to landlords in England this year were in these regions. Landlords in these areas will see the biggest cash increase in stamp duty, £6,000 on average. However, high expectations of future house price growth will likely mitigate some of the impact of the tax increase. If prices grew at the same rate as the last five years, within 12 months the growth in house prices would have offset the cost of the additional stamp duty. In the Midlands and North of England, 16% and 12% of total sales respectively are to landlords. Countrywide data shows that the average property bought by landlords in these regions would previously not have faced any stamp duty but will now face a £3,200 tax bill next year. The changes to stamp duty come as the shortage of homes available to rent continues, levels of stock have decreased 5% year on year. The growing imbalance between supply and demand will continue to support rent increases in future months as tenants compete for fewer homes. ‘The stamp duty increase will impact landlords’ purchasing power. Many entering the market will be faced with a choice between making a lower offer when buying or having to cover the additional costs themselves,… Continue reading
New funding model announced to bring hundreds of shared ownership homes to London
A pioneering funding model with input from major institutional investors means that 1,000 new homes for shared ownership will be built in London. London Mayor Boris Johnson said that it will make home ownership accessible to many more people and described it as a significant boost to his plans which have already seen 52,000 helped into shared ownership homes through his First Steps programme. He said that he aims to double the number of shared ownership units built in London by 2020 and has also directed the Greater London Authority to begin purchasing land in areas suitable for further shared ownership developments. The latest two investments with Chaco Ltd and the London Borough of Barking and Dagenham working with institutional investors have been allocated £45 million from the Mayor's First Steps Challenge Fund. A further £120 million from long term private sector investment will add to the Mayor's loan funding. The fund is aimed at attracting investment from institutions such as pension funds and insurance companies to build part buy, part rent housing for low and middle income Londoners. It is expected to attract more than double its initial investment, providing strong value for the taxpayer. The Fund adds to successful efforts to encourage institutional investment for the purpose-built private rented sector, building a bigger pool of investors and new providers to support house building. The GLA will explore purchasing land in areas, such as Housing Zones, where the shared ownership model could be expanded. This would ensure vacant plots are put to productive use and preserve the developments for shared ownership properties. The GLA has successfully brought to market all of its surplus sites since the Mayor was elected, providing almost 50,000 new homes, and will now look to make acquisitions where it will accelerate or unlock new homes. ‘This scheme is a brilliant way to open up home ownership to Londoners on modest incomes, making the first step on the property ladder just that little bit easier. We've already helped 52,000 Londoners to buy their first home and realise their dream, and I'm very pleased that the first institutional investors have come on board through my First Steps Challenge Fund,’ said Johnson. ‘This is a great vote of confidence in a housing model which is incredibly popular with consumers, and we need to see more of it in London,’ he added. The first investment under the First Steps Challenge Fund scheme will be delivered in partnership with the London Borough of Barking and Dagenham and part-funded by institutional investors, and result in up to 500 new shared ownership homes by 2020. The Greater London Authority will contribute £22.5 million to the development, which will be more than matched by pension funds and other institutional investors, and repaid within 15 years with interest. The second investment will be delivered in partnership with Chaco Ltd, an organisation that provides institutional non-bank funding for housing associations and registered providers, to build 500… Continue reading
