Tag Archives: homes
Warnings over impact of buy to let mortgage tax change announced in UK Budget
The UK property market is set to see a number of impacts as a result of a mini Budget announced in July aimed at stabilising the country’s economy. Perhaps the most controversial announcement by Chancellor of the Exchequer George Osborne was a cut in tax relief on mortgage interest payments for buy to let landlords which some believe will ultimately lead to higher rents. The Chancellor also, as expected, increased the rate at which inheritance tax will be paid on a home to £1 million and increased room rental tax relief to £7,500 per annum. Although phased in from 2017 to 2020, the buy to let tax change will make investment a less attractive proposition for landlords. Indeed, it will discourage investment in the sector which could lead to higher rents and less rental homes available, according to Graham Davidson, managing director of Sequre Property Investment. ‘This is an example of politicians not understanding how the market operates, directly contradicting their apparent goals for an improved private rented sector. Landlords should be free to deduct legitimate costs, just like any other business does,’ he pointed out. Gráinne Gilmore, head of UK residential research at Knight Frank, described it as ‘a significant change in tax status’ for those with a rental portfolio. ‘Those planning to purchase a buy to let property will have to factor these new rules into their calculations, and this could affect the offers they are willing to make,’ she said. 'If the relatively low yield environment seen today, especially in the South of England, is still evident when these changes start to come into force, there could be upward pressure on rents. The need for rental accommodation is strong, and we expect this trend to continue, especially in city centre markets around the UK,’ she added. Jamie Morrison, private client partner at HW Fisher & Company, believes it will lead to higher rents. ‘It will cause many landlords increasing pain which will quickly be passed on to tenants in the form of higher rents. Highly leveraged landlords could pull out of the market too, reducing the supply of rental properties and ratcheting up rents even further,’ he said. According to Russell Quirk, chief executive officer of online estate agent eMoov, landlords are going to be up to 20% worse off as previously enjoyed tax relief rates of up to 45% disappear. ‘Based on the average rent they could be up to £2,000 worse off each year. I can only see the result being an increase in rental prices which in turn further hampers those trying to save to get on the property ladder,’ he explained. Henry Woodcock, Principal Mortgage Consultant at IRESS, pointed out that buy to let has been the key area of growth in the mortgage market and changing its tax treatment is likely to dampen mortgage activity and demand from property investors, which will hit overall lending figures. ‘Equally, we may see a number of landlords leave the… Continue reading
US housing negative equity rates falling, latest data shows
The housing market negative equity rate in the United States is falling but more than half of underwater home owners are nowhere near resurfacing, the latest research shows. More than 4 million US home owners owed the bank at least 20% more than their properties were worth in the first quarter of 2015, according to the report from real estate firm Zillow. That means those homes would have to appreciate at least 20% for their owners to have any chance of breaking even on a sale. While home values are forecast to continue rising, they are expected to do so at a slower pace than recent years. Overall the national negative equity rate dropped to 15.4% in the first quarter, down from 18.8% in the first quarter of 2015. The data also shows that the rate of negative equity improved in all of the 35 largest housing markets in the first quarter of 2015, a sign that, metro by metro and home by home, the country is continuing to recover from the lax lending rules and subsequent housing market bust of the last decade. At the peak of the real estate crisis, more than 15 million home owners owed more on their mortgages than their homes were worth, putting them in negative equity. Foreclosures, short sales and rapidly rising home values freed nearly half of those home owners, leaving 7.9 million home owners upside down at the end of the first quarter of 2015. Home owners who remain underwater will likely be the toughest to free from negative equity, the report points out. It also explains that while spring and summer are the busiest buying and selling seasons and this year there is high demand for homes in the bottom third of the market, a disproportionate number of those home owners are simply stuck in their homes and can't afford to sell to buyers looking for homes in their price range. The rate of underwater home owners was much higher among the homes with the least value. More than 25% of those who own the least valuable third of homes were upside down, compared to about 8% of the most valuable third of homes. The imbalance was even more pronounced in some markets. In Atlanta, for example, 46% of low end home owners were underwater, compared with 10% of high end home owners. And in Baltimore 32% of low end home owners were in negative equity compared to 9% of those who own the highest value homes. ‘It's great news that the level of negative equity is falling, but what really worries me is the depth of negative equity. Millions of Americans are so far underwater, it's likely they may not re-gain equity for up to a decade or more at these rates,’ said Zillow chief economist Stan Humphries. ‘And because negative equity is concentrated so heavily at the lower end, it throws a real wrench in the traditional housing market conveyor belt. Potential… Continue reading
Home valuation rush expected for inheritance tax change in England and Wales
There is set to be a rush of home valuations in England and Wales after the Chancellor George Osborne signalled that properties worth up to £1 million will be scrapped from inheritance tax. Currently the tax is levied on homes from £650,000 but in the government’s mini Budget later this week he will raise the threshold. It means that owners of homes worth up to £1 million can pass them on to their children tax free. An analysis of Land Registry data suggests that owners in Gloucestershire, Yorkshire, Somerset, Dorset and Cheshire may be leading the charge to get their homes re-valued. It could also leave looming insurance problems for up to a third of families living in high value or listed homes which are more expensive to repair or rebuild, according to the study by NFU Mutual, a leading rural insurer and financial advice firm. ‘If you don’t know how much your home is worth, then there’s a real danger that you and your family could lose out. Around three in every 10 homes are undervalued by their owners, leaving families at risk of underinsurance and an unexpected tax bill,’ said Nicki Whittaker, high value home specialist at NFU Mutual. Around 80% of million pound homes sold in England and Wales in the last 15 years are in London and the South East but there are concentrations of expensive homes across the rest of the country, including Gloucestershire, Cheshire and Dorset. ‘We expect there will be a rush to re-value these properties as parents and grandparents look to hand down as much as they can to their families. But many of these bespoke and listed properties need more thorough assessment to establish their true worth,’ explained Whittaker. ‘Figures from our valuation partners show many expensive country homes are dramatically undervalued because owners are often unaware that the cost of rebuilding listed and unique properties is so much greater,’ he pointed out. ‘It’s clear from these results that thousands more people need to take action if they want to make sure their biggest financial asset remains in the family. A valuation and some simple tax planning would help to make sure people are fully protecting what is rightfully theirs,’ he added. The Conservative Party outlined plans for a new transferrable main residence allowance in its election manifesto earlier this year. The move, to be announced by Osborne in his Budget speech on Wednesday 08 July 8, would increase the effective inheritance tax threshold for married couples and civil partners to £1 million. Continue reading
