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New UK property tax measures set to boost buy to let
The UK’s new property tax rules are set to provide a boost to both the sales market and buy to let market, it is claimed. The new rates will give the biggest savings to buyers at the lower and middle end of the market and according to Stephen Ludlow, chairman of lettings age Ludlow Thompson, as buy to let landlords usually invest in properties below £937,500 the changes will give almost all investors in this market a boost. ‘The changes in stamp duty will see the biggest increase in net returns for more modestly investments such as smaller properties in Zone three of London, city centre apartments, flats above shops, ex-local authority property and property in secondary locations,’ he said. ‘The reforms could encourage those who may have been delaying their purchase until after the election to reconsider. The new rates should also provide a boost to the sales market and result in an increased number of purchases in this usually quiet time for residential property deals,’ he added. Graham Davidson, managing director of Sequre Property Investment, also believes the change is a positive one for the buy to let market. For example, a buyer of a high end two bedroom Manchester city centre apartment at a price of £150,000 will now pay just £500 stamp duty, a saving of £1,000. ‘However the impacts on the £925,000 plus market will certainly be felt throughout the industry, in particular by the higher end London property market. We would expect to see this contribute to a further slowing of the market there,’ he added. Alison Platt, group chief executive of Countrywide, said the change is likely to attract more home buyers to the market. ‘So for those who are thinking of selling their property, there has never been a better time. Equally for buyers, a stable interest rate environment and the availability of a range of attractive mortgage products, means that now is an ideal time to purchase a home,’ she explained. But Jamie Lester, head of Haus Properties, thinks it send shockwaves through the London market, particularly in the £1.5 million to £2 million price range. ‘This market has been especially active with buyers sticking below the 7% stamp duty and proposed mansion tax thresholds. These buyers will now have to pay a significantly higher amount,’ he said. ‘For example, someone purchasing a £1.9 million property would have paid £95,000 under the old stamp duty rules, whereas under the reforms they will be paying almost £50,000 more at £141,750. However, those buying just above £2 million won't be quite so heavily hit, for example, someone purchasing at £2.1 million will now be paying £165,750, an increase of £18,750,’ he explained. Camilla Dell, managing partner of independent property buying agency, Black Brick, said there is no question that the old stamp duty bands were in desperate need of reform and overhaul. ‘For 98% of the UK population these changes are therefore clearly good news. But… Continue reading
Private rental sector identified as a growth area in UK property markets
The changing lifestyles of people aged under 35 and a shift in sentiment towards property ownership are set to contribute to a surge in the UK’s private rental sector, it is claimed. It could actually be the solution to the country’s housing problems, according to experts speaking at an annual property seminar hosted by Midlands law firm Lodders Solicitors. ‘We need to have a shift in attitudes towards renting, and the private rental sector could be the solution to the UK’s housing problems,’ said Jon Bellfield, managing director of the Barberry Group, a privately owned property development and investment company. The event’s speakers independently identified the private rental sector as an important and emerging sector, and where the growth is likely to be. Indeed, the sector could account for 30% of the housing stock by 2020, the seminar was told. It heard that the UK is building fewer new residential homes than in 1926, and this short supply is also contributing to the creation of a large rental market, with the difficulty for first time buyers to enter the property market fuelling demand, although the Help to Buy scheme has had a positive impact. People are changing how they want to live and use their town and city centres, and the potential challenge is for developers to build the accommodation these people want, to include quality apartments complete with concierge, secure internet purchase rooms, gym and pool facilities, and easy access to bars, restaurants and shops. Recent research by Savills, for example, has revealed an increase in development activity across the country, and rising demand for land, with values starting to increase. Amongst the under 35s, there’s a growing shift in sentiment around property ownership, which they see as not as important as it was four or five years ago. ‘We expect the private rented sector to grow faster as mortgages are constrained and become less affordable and the annual housing costs for the under 35s is already dominated by private rents,’ said Simon Horan, head of residential development in Birmingham at Savills. Another issue that emerged is the Community Infrastructure Levy (CIL) which local planning authorities need to have in place by April of next year. According to Savills’ planning specialist Michael Davies only a few have it in place. ‘LPAs need to consider the impact of the restrictions on the delivery of infrastructure in their area, and developers and house builders should work with LPAs to identify key pieces of infrastructure needed for the delivery of housing sites, with Section 106 agreements that refer to specific named projects,’ he explained. However, he added that further guidance from Ministers is essential, as failure to do so could have significant impact on the delivery of both infrastructure and housing. Lodders’ chairman George Campion concluded that while the economy seems to be recovery it is not uniform across the country and the biggest challenge will be getting developments over the line. Continue reading
Home sellers likely to benefit from new UK property tax rules as well as buyers
House sellers in the UK could be set to save £213 million a year to the tune of almost £7,500 each, according to research by property website Zoopla. The reform of the stamp duty property tax which took effect today will remove ‘dead zones’ that existed before each previous Stamp Duty band and see a more progressive approach adopted where buyers will only liable to the portion of the property’s value above each new level. In an analysis of property sales in the 12 months to May 2014, the firm reckons that 28,635 properties have been under priced in order to make them more appealing to buyers by avoiding steep jumps in stamp duty. Zoopla found that the number of property sales in the price bands immediately before an existing stamp duty threshold is significantly higher than expected, while the number of sales in the price band immediately after a threshold, the stamp duty dead zone, is considerably lower. ‘The new, graduated Stamp Duty system is a long overdue overhaul to what the Chancellor admitted was a poorly designed tax and represents a fairer system for the vast majority of home buyers,’ said Lawrence Hall of Zoopla. ‘It also means that those selling their home at certain levels are more likely to achieve the real value of their homes and won’t be forced to discount their properties to sneak under certain bands,’ he explained. ‘Unfortunately those buying property worth more than £937,000 may feel unduly penalised by the new reforms, but the new structure represents a more balanced system overall and a welcome alternative to the mansion tax plans that had been proposed,’ he added. As an example, a house purchased at £300,000 would have resulted in a £9,000 stamp duty bill. With the new system, a buyer will save £4,000 calculated as follows: 0% tax up to £125,000, 2% tax on £125,000 to £250,000 which is £2,500, 5% tax on the remaining £50,000, which is £2,500, leading to a total stamp duty bill of £5,000. Kevin Hollinrake, managing director of Hunters estate agents with 125 branches nationwide, said the firm has already had deals secured as a result of this change. ‘In our opinion, this is great news. For too long, stamp duty has distorted the market deterring sellers from marketing their homes and buyers from buying them in the dead zones above the key thresholds such as £250,000 and £500,000. This should mean more property coming onto the market, and therefore, more sales which is good for the housing market and the economy as a whole,’ he explained. There will be substantial savings for around three quarters of a million home buyers across England and Wales according to research from Savills as all buyers up to £937,000 will benefit. By contrast, around 17,000 transactions above a value of £937,000 will bear an increased stamp duty tax burden, undermining the case for any further taxation of high value property. ‘The change is likely to make the… Continue reading
