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CML warns of negative impact of new 3% tax on second homes on UK housing market
The UK property market is facing a slowdown in buy to let activity due to tax changes for private landlords, says a submission to the Treasury over the extra surcharge on second properties. The Council of Mortgage Lenders is urging reform of the plans to charge an extra 3% for buy to let landlords and second home buyers from April this year to mitigate potentially negative impacts on the housing market as a whole. It says in its submission that even without the new surcharge, the forthcoming adverse tax changes for private landlords and the potential macro prudential interventions in the buy to let market will result in a slowdown. It points out that there is a risk of overkill in dampening investor sentiment to the extent that the flow of available private rented property could be disrupted, without any necessarily corresponding increase in the ability of households to become home owners. In addition, with around a fifth of households currently renting in the private sector, there is the perverse risk that the stamp duty increase could cause landlords to charge higher rents, and so actually make it harder for tenants who want to buy to save the deposit needed to do so. Under current proposals, some people will be caught by the requirement to pay the 3% surcharge even when they are buying their main residence, for example, if they have a short term overlap between owning their previous home and acquiring their new one, perhaps as a result of problems in the housing chain, the CML points out. ‘It would be better to allow people to defer their payment of stamp duty for 18 months subject to conditions, rather than require them to pay it upfront and then potentially reclaim it in the form of a rebate. This would be both fairer and more efficient,’ the submission says. ‘The government should clarify whether its policy intention is to favour institutions facilitating new build activity, or new build activity more generally. If the policy focus is on the perceived benefit arising from the economic activity, then the proposal should recognise the potential for even small scale and individual investors to contribute to this through off-plan purchases, and should not discriminate against them,’ it adds. Director general Paul Smee said that the CML’s longstanding view is that stamp duty is a blunt policy lever. ‘Given the complexity of the proposals, we also suspect that in practical terms the surcharge could cause more problems than it solves,’ he pointed out. ‘We urge the government at least to move away from a position where people will have to pay and then potentially claim back to one where payment is deferred, and only triggered if the buyer genuinely falls into the intended target category,’ he explained. ‘If the surcharge proposal is designed to promote home ownership, we think that there should be better evidence as to why this requires a reversal of growth in the private rented sector,’… Continue reading
Mortgage approvals end 2015 on a strong footing, bank data shows
Approvals for home purchases in the UK increased towards the end of 2015 with December being a strong month, according to the latest figures from the Bank of England. The number of loan approvals for buying in December was 70,837 compared to an average of 69,462 over the previous six months while the number of approvals for remortgaging was 41,708, compared to the average of 39,540 over the previous six months But the next few months are likely to be very different, according to David Whittaker, managing director of Mortgages for Business. ‘The next wave of activity will be powered by landlords scrambling to complete transactions before they are hit with extra taxes. This is only just beginning,’ he said. ‘With 01 April marking the point at which Stamp Duty on buy to let properties bites, many investors have been rushing to get their mortgages completed and expand their portfolios before this date,’ he pointed out. ‘Expect this flurry of activity to continue into the first few months of 2016, as investors rush to apply for their buy to let mortgages and lenders do everything in their power to get the good applications completed before the April crunch point,’ he added. Peter Williams, executive director of Intermediary Mortgage Lenders Association, pointed out that December was the busiest month for remortgaging in over two years, with activity growing more than twice as fast as overall approvals. ‘The continued appetite for remortgaging was likely to be a sign of home owners eager to capitalise on market competition and lock into lower rates, especially with US raising interest rates for the time in nine years and expectations the UK would follow suit in the not too distant future,’ he explained. After the Autumn Statement extensions to Help to Buy, and the rock bottom base rate lasting out the year, first time buyers were feeling decisive, and this was mirrored by a clear upswing in house purchase approvals from November to December, according to Peter Rollings, chief executive officer of Marsh & Parsons. ‘This energy has definitely been carried over into 2016, and January has already seen an impressive influx of motivated buyers, eager to progress up the property ladder,’ he explained, adding that 2015 was also the year of remortgaging for many existing home owners and this momentum is showing no signs of dissipating while cheaper fixed rate mortgages remain available. ‘But in the coming months we can expect strong buy to let lending, as the April introduction of higher stamp duty for second homes gives a new sense of urgency for those looking to invest in property or expand their existing portfolio,’ he added. Continue reading
Residential rental prices up 2.5% in UK in 2015
Private rental prices paid by tenants in Great Britain rose by 2.5% in the 12 months to December 2015, according to the latest index from the Office of National Statistics. Private rental prices grew by 2.7% in England, 0.7% in Wales and 0.9% in Scotland with rental prices increasing the most in London at 3.9%. When London is excluded the national year on year growth is 1.8%. Some of the more detailed ONS figures show that since January 2011 England rental prices have increased more than those of Wales and Scotland. The annual rate of change for Wales continues to be below that of England and the Great Britain average. Rental growth in Scotland has slowed to 0.9% in the year to December 2015, from 2.1% in the year for the months of January through to June 2015. The index series for England starts in 2005. Private rental prices in England show three distinct periods: rental price increases from January 2006 until October 2009, rental price decreases from December 2009 to October 2010, and increasing rental prices from November 2010 onwards. Of these three periods, 2008 showed the largest rental price increases. When London is excluded, England shows a similar pattern but with slower rental price increases from around January 2011. Since the beginning of 2012, English rental prices have shown annual increases ranging between 1.4% and 3% year on year, with December 2015 rental prices being 2.7% higher than December 2014 rental prices. Excluding London, England showed an increase of 1.9% for the same period. In the 12 months to December 2015, private rental prices increased in each of the nine English regions with the largest in London at 3.9% followed by the East at 2.8% and the South East also at 2.8%. Rental price increases have been stronger in London than the rest of England since November 2010. The rental market continued to show signs of strength overall in the fourth quarter of 2015 as prices increased by 2.5% in the year to December 2015 but this was a slowdown of 0.2% in the annual growth rate compared with September 2015. The ONS report says that this slowdown is partly driven by Scotland, where prices increased 0.9% in the year to December 2015, a fall of 0.7% compared with the annual growth rate in September 2015. It also points out that conditions in the housing market as a whole may have been supporting rental price growth. Data from the ONS house price index for November 2015 shows that house price growth has typically been stronger than rent price growth for a number of years. The Bank of England’s Agents’ Summary of Business Conditions for the fourth quarter of 2015 reported that private rental demand continued to grow steadily in the three months to December. Data from RICS’ Residential Market Survey for November 2015 confirmed this growth, noting that national tenant demand continued to grow in the three months to November 2015. The strength… Continue reading
