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Mansion tax would hit flats and terraced properties rather than palatial residences
A mansion tax for properties in the UK would not hit large detached palatial houses in London owned by exceptionally wealthy people but flats, according to a new analysis. The proposal has been criticised for its disproportionate impact on London so international real estate firm Knight Frank has undertaken an analysis of the two prime central London boroughs of Westminster and Kensington and Chelsea. The two boroughs contain 46% of the total number of £2 million plus properties in the whole of England and Wales, with the potential overall financial contribution likely to far exceed that. Furthermore, 26% of £2 million plus properties in England and Wales are flats in the two London boroughs, not the type of large detached property envisaged by the tax. More significantly, across the whole of Greater London, 38% of all £2 million plus properties are flats while only 14% are detached properties. Terraced houses are the second largest group at 36% while semi-detached properties make up the remaining 12%. ‘The figures demonstrate the mismatch between perception, in particular the term mansion, and the reality of the London property market, where three quarters of £2 million-plus properties are either flats or terraced houses,’ said Tom Bill, head of London residential research at Knight Frank. He also pointed out that any further property tax would also come on top of the large and growing contribution London already makes in the form of stamp duty. New data for the 2013/2014 tax year shows London properties contributed 81% of stamp duty revenue in the £2 million plus price bracket in England and Wales, up from 79% in the previous year. Additionally, £2 million plus London properties accounted for 14% of total stamp duty revenue in England and Wales while London transactions across all price brackets accounted for 42% of total revenue. Another concern that has been outlined is that house price growth, which is traditionally stronger in London than other areas of the country, means more properties would become subject to the tax over time. Since the idea was first floated five years ago, a property worth £1.08 million in prime central London would have grown to £2 million, based on price growth of 85% for properties worth between £1 million and £2 million within the prime central London index. Continue reading
The rate at which UK house sales fall through is rising
The rate at which house sales in the UK are falling through has increased steadily since March 2013, new research shows. Tougher mortgage rules have prevented purchasers borrowing as much as they anticipated they would be able to is one reason, according to the research from Quick Move Now. Also, buyers are increasingly nervous of a potential market crash, said Quick Move Now’s market analyst Donna Houguez. ‘We are seeing two clear reasons for the upwardly moving fall through rate. Stricter rules imposed on borrowing by lenders as a result of the mortgage market review have resulted in buyers making offers, confident that they would be able to secure a mortgage and then realising that they were unable to, forcing them to pull out of sales,’ she explained. ‘In August and September, the reason for sales falling through clearly changed, and it was the buyers themselves who became nervous. We saw a sharp increase in the number of buyers who had made a generous offer in order to secure a property against the competition change their mind and pull out amid fears of an imminent property market collapse,’ she added. Meanwhile, the Little House Company has compiled statistics from its database of private vendors to evaluate the trends of private sellers from June to August 2014. This data is particularly interesting as the summer months are generally regarded as a bad time to sell homes, yet the findings show a significant number of vendors bucked the trend and listed their homes this summer. The research shows that the average age of private vendors was 40.3 years of age, which suggests that the majority of private vendors are second time buyers. The research also shows that greater London is the most popular area to sell homes without an estate agent, compared to other UK regions. Central London remains a stronghold for estate agents with direct sales stronger in the suburbs. Private vendors are not limited to Greater London, and the data shows private vendors listing properties up and down the UK. The second and third most popular areas for private property sales this summer were Cheshire and South Yorkshire, respectively. Continue reading
New powers for Bank of England regarding Help to Buy scheme welcomed
The Royal Institution of Chartered Surveyors (RICS) has welcomed a move to give further powers to the Bank of England to manage property’s role in the country’s economy. It said that the decision announced this week by the Chancellor of the Exchequer George Osborne is a responsible step when housing development is being heavily stimulated. But it warns that a ‘permanent’ Help to Buy scheme needs to be carefully considered. Whilst there is a commitment to annual scrutiny by the Financial Policy Committee, RICS has called for a concise and clear exit strategy for Help to Buy and believes existing schemes should be focused on those regions which are seeing least activity and development, and have the greatest housing need. Under the change the Bank's Financial Policy Committee (FPC) will make annual reviews of the scheme, starting next September. The committee had been due to make an assessment of Help to Buy only after its first three years of operation. Osborne believes that the recent recovery in parts of the housing market has raised questions about the impact of the scheme so he has given the Bank more control. The FPC will be able to modify parts of the scheme to keep it in check. The FPC will also be allowed to review the scheme and could reduce the £600,000 cap, so fewer homes are affected. The FPC could also make loans less attractive by recommending that the Treasury raises the fees paid by lenders for the guarantees. Help to Buy was originally launched to help buyers of new properties in England, with other schemes operating in Wales and Scotland. A second, potentially much bigger phase of the scheme is due to begin in January to assist buyers who might otherwise be unable to afford a down payment on a home. The scheme provides taxpayer insurance for up to 15% of a mortgage on houses worth up to £600,000, allowing banks to provide up to 95% mortgages at a reduced risk. The plan has been criticised by opposition politicians and private sector economists for risking pushing up house prices, which have since risen by around 10%. However, in its first assessment this week the Bank of England has given a clean bill of health to the Help to Buy mortgage guarantee scheme, saying it does not pose material risks to financial stability. It also said it was not to blame for prices risesas it only accounted for around 5% of mortgages and was most used in regions where house prices had risen least. 'The scheme does not appear to have been a material driver of (house price) growth. For example, take up of the scheme has been weak in London where house price growth has been strongest,' the FPC said, adding that mortgage lending standards had not deteriorated since the launch of Help to Buy, and house prices appeared to be cooling sooner than the FPC had expected when it last met in June and imposed caps on general… Continue reading
