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UK residential property tax changes widely welcomed
Sweeping reforms to the Stamp Duty Land Tax (SDLT) in the UK have been announced which take effect immediately and will mean many people, especially first time buyers, will pay less property tax. The reform announced by the Chancellor of the Exchequer George Osborne abolishes the previous archaic bandings with a more progressive system designed to help young professionals and families get on the housing ladder. The new charge will only apply on a portion of value that is above each new level. So there will be no SDLT up to £125,000, 2% up to £250,000, 5% up to £925,000, 10% up to £1.5 million and 12% over £1.5 million. Osborne pointed out that only on purchases of more than £937,000 will buyers end up paying more than they have done. It is also likely that the chances of a mansion tax should be introduced are much diminished. The move has been widely welcomed by the property industry with experts saying it was long overdue. ‘The abolition of the archaic slab system will take the sting out of the tail for thousands of buyers on the lower rungs of the ladder. The new graduated system should help brighten the UK housing recovery in regions outside of London, where property prices are still battling back to pre-recession levels,’ said Peter Rollings, chief executive of Marsh & Parsons. But he pointed out that it will add to the weight of the tax burden shouldered by those buying more expensive homes. ‘In prime parts of London, where 56% of property is worth £1 million or more, this will impact a significant proportion of ordinary working families,’ he said. But he also said that he expects any additional strain on the top tiers of the housing market to be absorbed, and the natural rhythm of the property market won’t be disrupted as buyers investing in prime London property are accustomed to having to pay a higher price than elsewhere across the country and the unparalleled returns and capital growth on offer more than make it worthwhile, so demand won’t be quashed. ‘London property taxes have historically been cheaper compared to other world cities, so this overhaul brings it into line with rival global centres of investment and although, one-off purchase costs are always a bitter pill to swallow, it won’t deter people from snapping up their dream home in a desirable location. Buyers will soon adjust and it will simply become the norm,’ he added. Peter Mackie, senior partner at independent buying agents Property Vision, pointed out that the change will help 98% of people trying to get onto the property ladder but the impact of the changes will be greater at the lower end of the market where buyers rely on borrowed money, rather than the higher end where if a buyer can afford to pay cash for a £50 million house they can afford the Stamp Duty. ‘The increases in Stamp Duty over £1.5 million… Continue reading
A new garden city forms part of major new housing plan from UK govt
Thousands of new homes are to be provided as part of a new range of UK government measures that include the creation of a new garden city. Communities Secretary Eric Pickles said these new measures would support locally led efforts to build on the momentum gathered since 2010 which has seen house building levels rise to a seven year high. The initiatives include a locally led garden town at Bicester, backed by the council and local MP, which will provide up to 13,000 new homes and the provision of 10,000 new homes on surplus public sector land at Northstowe in Cambridgeshire. Also announced is a new target to release enough formerly used surplus public sector land for 150,000 new homes between 2015 and 2020 and government support to provide 11,000 new homes at Barking Riverside in East London, and 7,500 new homes as part of the redevelopment of Brent Cross. The government also announced measures that will provide 275,000 new homes between 2015 and 2020, the fastest rate of affordable house building in two decades and the first four housing estates to be shortlisted for a share of £150 million to kick start their radical regeneration. Pickles said the programme would mean the creation of over 200,000 new homes across the country and added that the government is also committed to expanding existing towns. Mark Hayward, managing director of the National Association of Estate Agents, generally welcomed the announcements. ‘In one respect, the announcement of the 13,000 new homes to be built in Bicester may be seen as a good thing for the area and housing market there. Bicester is already a town which we have seen undergoing development in the last few years, and so new housing in the area will help to support its growth,’ he said. ‘ However, while this is a small and welcome step in the right direction in terms of housing supply, there is still much more needed across the country to meet the demand for housing both now and in the years to come. This need is reflected in the most recent announcement today of further significant building programmes,’ he explained. ‘It would seem that former public sector land now laying idle will form part of a significant plan to improve the number of available homes in the next five years. In addition, it would appear that support to provide new homes at Barking Riverside and Brent Cross is yet another step towards achieving the number of new builds so needed in those areas,’ he added. But he pointed out that whilst infrastructure investment has been mentioned, the lack of capacity, in terms of skills and labour, is currently insufficient to meet the targets announced. ‘In terms of the affordable new homes programme announced, this is extremely good news, however this must be coupled with the availability and achievable accessibility to mortgage funds for first time buyers to enable them to benefit from the initiative,’ he added. Continue reading
Home price growth in the US continues to moderate
National home price gains in the United States fell to 6.7% year on year and 1% quarter on quarter in November, according to the latest index from Clear Capital. National trends were echoed at the regional level, with the West seeing the strongest moderation across the country and overall growth has slowed now for 11 months in a row. In fact, for the first time since the start of the recovery three years ago, the West’s yearly rates of growth fell below 10%, a sure sign of more moderation to come over the next several months for the nation, according to the firm. At the height of the recovery in 2013, national prices including distressed sales outperformed the performing only sale segment of the market by 4.2%. Now the all sale segment is outperforming the performing only sale segment by 3%. These segments’ rates of growth will likely continue to fall in line with each other as investor engagement dwindles, a result of fewer distressed sale opportunities. As this occurs, markets will be more reliant on performing only sale demand and price growth,’ the index report explains. It also points out that improvements in the broader economic landscape have not instilled confidence in traditional home buyers and the general lack of demand in the performing only segment, coupled with a dwindling supply of distressed inventory, leaves the future of home prices squarely in the hands of traditional home buyers, who have yet to show any signs of re-engaging. It says that performing only sales are not yet strong enough to support recovery sized market growth without distressed sales. The data also shows that it has been a steady descent for national yearly rates of growth. They have dropped 5% from a high of 11.7% in December 2013. This is due in part to the market’s natural normalisation as the correction to the correction subsides and distressed sale inventory dries up. While this is healthy for markets overall, the weakness of price growth in the performing only segment is further cause for concern. Excluding distressed sales, performing only national home price growth over the last year was just 4.4%, down from a recovery high of 7.2%. Even more concerning is the performing only segment’s drop in quarterly growth to 0.6%, nearly cut in half over the last rolling quarter which saw quarterly rates of growth at 1.1%. ‘Reduced reliance on distressed sales and diminishing gains in the performing only sale segment could be too much for the recovery to overcome as we enter winter. The recovery is at a tipping point. Markets need non investor demand to ramp up, and home buyer confidence restored,’ said Alex Villacorta, vice president of research and analytics at Clear Capital. ‘Should this turn into a negative feedback loop, the likelihood for quarterly price declines at the national level could turn into yearly price declines by the end of 2015. Performing only sale trends are a bellwether for what’s to come next year,’ he explained. ‘Think of… Continue reading
