Tag Archives: capital-gains
High proportion of UK landlords considering ways to combat tax change
Some 40% of landlords in the UK are either seriously considering forming a limited company in order to limit their exposure to changes that will restrict mortgage interest or will be looking into the option in the coming months, according to new research. However, the research from the National Landlords Association (NLA) found that so far only 1% had actually incorporated, which the NLA says can be explained by the high cost of transferring property held personally into a company. The findings also show that 31% have no intention of moving their portfolio to a limited company and that 29% are still unsure about whether they will incorporate or not. Mortgage interest relief for individual residential landlords, which will be restricted to the basic rate of income tax of 20% by 2021, will begin to be phased back from April 2017. The changes will mean that landlords will no longer be able to deduct the cost of mortgage interest before declaring their taxable profit, and will instead receive a tax credit of 20% of their mortgage interest costs. The NLA has labelled the changes the Turnover Tax, because landlords’ tax will be calculated on rental income they earn, rather than their profits, forcing many basic rate payers into a higher bracket and leaving higher and additional rate payers with considerably bigger tax bills. Landlords structured as companies will be exempt from the changes, instead paying corporation tax, currently 20%, on their profits alone. ‘Transferring personally held property to a limited company isn’t a straightforward process, so it’s not surprising that so few have taken this action so far. Landlords need to do their research but many will realise that incorporating simply doesn’t stack up financially; doing so will incur capital gains and potential stamp duty charges, which means the process may be prohibitively expensive,’ said Richard Lambert, NLA chief executive officer. According to Richard Price, executive director of the UK Association of Letting Agents (UKALA), if landlords follow through with these intentions then it’s likely that more and more will take a hands on approach to managing their portfolios in the future, which would mean less business to go around for agents, and certainly less of a need for full service offerings. ‘The changes to taxation are forcing landlords to re-evaluate their businesses and their place in the market, so our advice for agents is to begin talking to your clients about their intentions over the next few years, and consider how you’ll meet their changing needs in a way that is distinct from your rivals,’ he pointed out. Continue reading
Rents in Australian capital cities up just 0.3% in 2015
Last year was lackluster for residential property rental growth in cities in Australia with rents increasing by just 0.3%, the latest index data shows. Rents increased by 2.2% in Melbourne, by 1.9% in Sydney and Canberra, and by 0.6% in Hobart. They fell by 13.2% in Darwin, by 8% in Perth, by 0.3% in Brisbane and by 0.2% in Adelaide. ‘We’ve never seen rental growth as sluggish as it is at the moment. Furthermore, we’re expecting to see more of the same over the coming months due to increases in the supply of new housing, rental stock and a further slowdown in migration rates,’ said CoreLogic RP Data research analyst Cameron Kusher. The CoreLogic RP Data index also shows that combined capital city rental rates are at $483, an increase of just 0.3% over the past 12 months which is a record low rate of annual growth based on records back to December 1996. A comparison between December 2015 and December 2014 shows in 2014 annual rental growth was slowing but was tracking at a much higher 1.8% which highlights just how much the rental market eased throughout 2015. ‘The construction boom across the capital cities, coupled with slowing population growth, low mortgage rates and the recent heightened level of activity from investors are the major contributing factors to the slowing rental growth in 2015,’ said Kusher. ‘Although Sydney and Melbourne saw the largest ramp up in new housing supply, both cities still recorded rental increases over the year, although rental growth is slowing relative to 12 months earlier,’ he explained. ‘It is clear that the increase in investment stock continues to provide landlords with little scope to lift rental rates while the low mortgage rate environment provides little incentive to push yields higher,’ he added. The firm predicts that growth in rental rates is likely to remain weak or potentially slow even further over the coming months. The good news for those looking to rent is the possibility that rental rates will fall even further over the coming year. ‘While the news for renters will be welcomed, investors may be facing weaker capital gains coupled with little in the way of rental growth or yield. The large pipeline of residential construction activity and recent high levels of investment demand means that renters are likely to continue to have plenty of choice,’ added Kusher. Continue reading
Home values in Australian capital cities flat, latest index data shows
Residential property values were flat in capital cities in Australia last month with Sydney, Canberra and Adelaide seeing price falls. The downturn in these cities were offset by values rising across the remaining five capital cities, according to the latest CoreLogic RP Data home value index. The Sydney housing market was the main drag on the December results, with dwelling values down 1.2%, while values were down 1.5% in Adelaide and 1.1% in Canberra. The remaining capitals saw a rise in dwelling values, led by a 2.3% rise in Perth values and a 1% rise in Melbourne over the month. After dwelling values had been broadly rising since June 2012, the December quarter results revealed a 1.4% fall in dwelling values across the combined capitals, the largest quarter on quarter fall since December 2011. Six of the eight capital cities recorded a negative result over the December quarter, with weaker conditions in Sydney and Melbourne acting as the greatest drag on capital city performance, according to CoreLogic RP Data head of research Tim Lawless. The largest quarterly fall was recorded in Sydney, where dwelling values were down 2.3% over the final three months of the year, followed by Melbourne, where dwelling values were 1.9% lower. The only capital cities to show a rise in dwelling values over the December quarter were Brisbane with growth of 1.3% and Adelaide up 0.6%. This was in contrast to the first three quarters of 2015, where capital city dwelling values rose by 9.3%, largely driven by a 14.1% surge in Sydney values and a 13.3% increase in Melbourne. In stark contrast, the final quarter of 2015 showed Sydney as the weakest performer of any capital city, with dwelling values down by 2.3% while Melbourne recorded the second weakest result with a fall of 1.9%. The complete 2015 calendar year results reveal a 7.8% increase in capital city dwelling values which is the lowest rate of capital gain over a calendar year since 2012 when values slipped 0.4% lower over the full year. Highlighting the diversity in the capital city housing markets, dwelling values fell across four of the eight capitals in the 2015 calendar year. The largest of these falls were recorded in Perth, down by 3.7%, and Darwin down by 3.6%. Hobart and Adelaide also showed subtle falls of 0.7% and 0.1%. Despite the recent weakening of housing market conditions in Sydney and Melbourne, the two largest capital city housing markets still recorded much stronger annual gains than all other capital cities, 11.5% in Sydney and 11.2% in Melbourne. Dwelling values in Brisbane and Canberra were up a more sustainable 4.1% over the year. ‘The wealth created from housing in Sydney and Melbourne has been exceptional over the past 12 months. In dollar terms, Sydney home owners have seen approximately $82,000 added to their wealth thanks to the strong capital gains over the year while home owners in Melbourne have seen the value of… Continue reading
