Tag Archives: real estate
UK mansion tax could affect thousands of ordinary home owners, expert warns
If a mansion tax is introduced in the UK on higher value homes the knock-on effects could prove disastrous for thousands of ordinary home owners, it is claimed. Owners who still have mortgages on their properties or who have invested for their retirement in property and benefitted from the rise in values rise over time will be affected the most, according to Chestertons estate agency. The Labour party, the Liberal Democrats and the Greens are all proposing some form of levy on higher value homes so any deal between the parties that sees Ed Miliband become the next Prime Minister would surely see a mansion tax brought forward, probably within the first few months of the new administration taking power. For those with a mortgage, the levy would be an effective ‘tax on debt’, according to Chestertons Group chief executive officer Robert Bartlett. ‘Let's be clear, this is a wealth tax in every way but name. Details are scant on how it will work in practice, or how much revenue it might raise, but the threshold of what qualifies as a mansion would likely fall around the £2 million mark,’ he said. ‘We know the vast majority of these homes are in London and, while Miliband himself jokes that his current London home would fall into this bracket, it will be no laughing matter for thousands of ordinary Londoners,’ he explained. ‘Unless you are very rich, you are likely to have a mortgage on your home. Let's say your home is worth £2.5 million but you have a £1.5 million mortgage. That means your asset value is only £1 million, but you will be taxed as though you own the property outright. This would potentially make this tax the UK's first ever tax on debt,’ he pointed out. He added, that even if the property is owned outright, perhaps having been bought with a mortgage which has now been paid down in full, then the mansion tax could prove problematic for many households. ‘Older householders may be particularly hard hit, especially if they are retired and on a reduced income. They are also less likely to be able to remortgage to release capital. They could be forced to sell up and downsize to avoid a tax they simply can't afford. In many cases they may have to move away completely if more affordable homes are not available in their local area,’ said Bartlett. ‘The implementation of a new tax with a threshold beginning at £2 million would also likely have an immediate impact on values. Properties worth around £2.25 million for instance could drop to under the £2 million threshold overnight, which could send many home owners into negative equity. Thus in turn the tax may not bring in as much as calculated,’ he explained. He also believes the threshold could creep downwards. ‘It is very easy for a government to change tax thresholds and I expect that we will quickly see the £2… Continue reading
Many wanna be pensioner landlords don’t know where to start, study suggests
More than a quarter of would be landlords in England and Wales considering buy to let to boost their retirement income do not know how to apply for a mortgage to get started, new research shows. The research conducted for specialist mortgage lender Kensington shows more than half of over 40s retirement savers would consider investing in buy to let to increase their income in retirement following the launch of pension freedoms. When it comes to choosing the right product, around 44% would use a broker to source a buy to let mortgage while 28% would go to their existing lender, but 28% don’t know how to get started. Kensington analysis of average flat and maisonette prices across England and Wales shows the 25% deposit need for a first time landlord taking the plunge following pension freedom is nearly £43,000. It ranges from £8,128 in Blaneau Gwent in Wales to more than £104,000 in Greater London. It suggests that would be landlords considering investing pension cash believe the risk of failing to achieve a comfortable level of income is the biggest risk. Around 47% of those questioned are concerned about the risk of not achieving the income they want followed by 42% who fear investing in buy to let could mean running out of money in retirement. Around 25% are concerned about the income tax implications of withdrawing pension cash to invest while 21% fear they will not understand the rules on buy to let. ‘The outlook for the buy to let market is bright and the potential for further growth as pension freedoms come into effect is undeniable. However the would be landlords will need to be realistic and it is worrying that so many are considering buy to let without knowing how to apply for a mortgage,’ said Steve Griffiths, head of sales and distribution at Kensington. Advice from brokers on mortgages is vital. Claims of a wall of money are unlikely to come true and in any case raising a 25% deposit for a buy to let mortgage from pension funds will be tough as a look at average property prices across the country shows,’ he added. Meanwhile, separate research shows that 12% of 20 to 35 year olds are prepared to ask their parents to access pension savings to help pay for a mortgage deposit. But only half as many over 55s are willing to use their pension to help children or grandchildren buy a home, says the study from investment and pension provider Old Mutual Wealth. However, just 6% of those in the 55 to 70 age bracket say they would use some or all of their pension wealth to help children with a house deposit. Continue reading
Monthly landlord survey reveals effect of general election on private rented sector
Three quarters of letting agents are concerned that proposals for the creation of three year tenancies in England and Wales put forward in the run up to this week’s UK general election, a new report reveals. Members of the Association of Residential Letting Agents (ARLA) believe that the proposal put forward by the Labour party will see landlords exit the market and reduce supply. However, over a third of ARLA agents agree the Conservatives’ pledge to build 200,000 new starter homes will benefit the private rental sector the most. The report comes at a time when demand for rental accommodation was down in March, whilst supply rises. Some 72% of ARLA letting agents said three year tenancies, with a cap on rents will see landlords pull out the market, and lead to a decrease in the supply of rental property landlords in the North West and East Midlands most likely to pull out the market, with 84% of ARLA agents in these regions expressing concern. As well as seeing a reduction in landlords and therefore supply of rental housing, 74% believe the proposed three year tenancy agreements with rent controls and strict rules to make it more difficult to evict tenants will not actually benefit tenants at all, up from 69% in February. Meanwhile, 37% of ARLA agents agree that the Conservatives’ pledge to build 200,000 new starter homes offered at 20% discount to first time buyers would be best for the private rented sector. This will enable a segment of the current British renting population to get on the housing market, freeing up more properties for renting, helping to ease supply and demand. The March report also shows how the upcoming election is having an effect on the current levels of supply and demand for the private rented sector, as people hold out to see the outcome. Demand was down by 10% in March with just 36 house hunters recorded, down from 40 in February. Supply is heading in the other direction, with a rise in the number of properties managed per branch at 192 properties in March, up from 184 the previous month. Rents continue to increase for some, as 32% ARLA agents said that rents increased between February and March, the same increase as the previous month. ‘The vast majority of ARLA letting agents are worried that Labour’s proposed three year tenancies with strict caps on rents will only cause the gap between supply and demand to widen,’ said David Cox, managing director of ARLA. ‘Flexible tenancies are what makes the sector work, if this changes, some landlords will be forced to exit the market and tenants are likely to automatically incur rent hikes and feel driven to stay in agreements for longer before getting on the housing ladder; thus not freeing up rental properties for other tenants,’ he explained. ‘The proposals are aimed at reducing opportunities for landlords to raise rents and to create stability for tenants. However, Labour’s proposals aren’t… Continue reading
