TSI
Continued uncertainty over tax still affecting prime central London property
Annual price growth in prime central London fell to 0.9% in November, against the background of prolonged uncertainty surrounding the impact of property tax, according to the latest analysis report. Annual growth was at its lowest level since October 2009, with a monthly decline of 0.3% contributing to the slowdown, says the report from international real estate firm Knight Frank. In the six months to October, when asking prices fell by 10% to 20%, exchanges took an average of 24 weeks but viewing levels in October were the third highest since the start of 2014, it also shows. It points out that the Autumn Statement from Chancellor George Osborne which announce that buy to let investors and those purchasing second homes face paying an extra 3% in stamp duty tax from next April came as tentative signs began to emerge that buyers and sellers are adjusting to previous stamp duty changes introduced in December 2014. ‘After a year under the new system, which raised rates for properties worth more than £1.1 million, a growing number of vendors have begun to set asking prices that reflect the more subdued level of demand and heightened sensitivity to pricing among buyers,’ said Tom Bill, head of London residential research at Knight Frank. He explained that Knight Frank sales data for the six months to October shows properties sold at an incrementally slower pace as the achieved price fell below the asking price. In instances where the achieved price was 80% to 90% of the asking price, where the asking price came down by between 10% and 20%, exchanges took an average of 24 weeks. This compared to nine weeks where the asking price and the achieved price are the same, that is to say where no reduction was necessary. ‘It demonstrates the strength of underlying demand, which is reflected in the fact viewing levels have increased in recent months. Viewings in October were at the third highest level since the start of 2014,’ Bill added. November also saw the release of Knight Frank’s global tax report, which showed London was in the middle of the pack compared to other major global cities in relation to prime property tax and holding costs. ‘The latest stamp duty changes appear unlikely to alter this position materially,’ said Bill. Continue reading
The UK tax changes for landlords trigger lending surge
Radical changes to the tax for buy to let landlords in the UK have already triggered a surge in borrowing with the latest announced last week set to have a similar effect, a new report suggests. The changes announced in the Budget in the summer to lower the tax relief for mortgage interest payments for landlords from April 2017, has already caused an increase in the number of landlords seeking to create limited companies. According to the Buy to Let Britain report from specialist mortgage lender Kent Reliance this has resulted in applications for incorporation increasing 213% year on year. It says that a quarter of all buy to let mortgage finance is now through limited companies, up 13% on a year ago. For the whole buy to let market this means 56,800 buy to let loans will be issued to companies in 2016, conservatively assuming total lending doesn’t grow. This is an increase of over a fifth compared to the estimated total for 2015 and up 90% on 2014. Following the Autumn Statement, the Treasury is now consulting on whether corporate entities with over 15 properties would be excluded from the newly announced stamp duty surcharge, an exemption that will add further incentives for professional landlords to incorporate, boosting demand, the firm says. The switch to limited companies will not be the only impact of the recent tax changes. The average value of a buy to let property stands at £220,726 and the new 3% stamp duty charge announced in the Autumn Statement would represent an additional upfront charge of £6,622. The firm says that many landlords will naturally seek to recoup this through rental charges. If a landlord held a property for 10 years, spreading this cost over the duration would represent an increase in rent of £55 per month for a tenant. This would support rental inflation which currently stands at 8.3% on an annual basis. Andy Golding, chief executive of OneSavings Bank, which trades under the Kent Reliance and InterBay brands, said that the changes to the tax treatment in the last six months will bring unintended consequences. ‘First, the rush to put properties inside a limited company will be sustained, especially if larger scale investors are indeed exempted from the new stamp duty surcharge. Secondly, the buy to let market will see activity hit overdrive between now and April as landlords seek to beat the stamp duty deadline,’ he explained. ‘Smaller scale investors are now more likely to think twice before investing and I see that as a good thing. However, in the longer term, it is tenants who will pay the price of the chancellor’s tax raid on buy to let, as landlords will recoup increased costs through rent increases. Ultimately, the move will do little to help tenants save for a deposit on a home of their own. Making rented homes more expensive was surely not the Chancellor’s intention,’ he pointed out. He believes that… Continue reading
Poll finds UK home buyers think conveyancing process it old and slow
The legal conveyancing process when buying a home in the UK is often seen as too complicated and slow and in need of modernisation, according to a new survey of home owners. Some 42% felt their experience of the process was too complicated and slow and only 4% of felt the process was quick while 23% felt it need to be brought up to date, the YouGov poll for land, environment and property data firm Landmark Information Group. With home buyers becoming more aware of environmental risks that could affect properties following high profile flooding events, the emergence of sinkholes and other such land based risks, some 37% agreed that the home buying process would be improved if all environmental search information was provided online, instead of through the post. To add to this, 22% said they were confused and relied on the guidance provided by the solicitor when receiving the environmental search reports, in order to summarise the key findings and interpret the risks. When asked whether enough environmental information is provided as part of the home buying process, 785 people from the total 1,314 respondents provided an answer, of which 26% felt that not enough information was provided to them by their solicitor. ‘With everything being digital in today's world, people are used to carrying out transactions with speed and immediacy. It is clear that changes need to happen in order to meet people's evolving needs and expectations,’ said Angela Gordon-Lennox, product manager (legal) of Landmark Information Group. The survey also found that 22% want easy to read information, while 37% agreed or strongly agreed that the home buying process would be improved if all environmental information from a conveyancing solicitor was provided via the Web instead of through the post. The firm is currently market testing a new all in one environmental report for the conveyancing industry called RiskView Residential which also provides interactive links to an online portal, enabling home owners to instantly visualise environmental risks on a digital map. The aim is to collectively present the findings previously provided in four separate legal reports in one order. This includes flood risk, contaminated land, ground hazards, and energy and infrastructure. The combined analysis is delivered in an easy to read lightweight PDF report, which includes interactive web-links enabling conveyancers and their clients to click through and instantly view the data within an interactive online map. ‘So far, the feedback received is that not only does RiskView Residential help simplify the process, but it is the first radical step in taking conveyancing due diligence into a fully digital age,’ said Gordon-Lennox. Continue reading
