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Slight CGT rise welcomed in wake of fragile recovery

[ Posted July 14th, 2010 ]

UK property market experts have predicted that although the difficult measures implemented in the recent emergency budget are generally for the best in what are difficult and parlous circumstances, they will, nevertheless, do little or nothing to stop the fall of residential property prices in the UK. Despite the fact that the lower-than-expected increase in Capital Gains Tax has been widely welcomed within the UK real estate industry, many analysts have commented that the rise will impact upon the buy-to-let sector, thereby discouraging private rental landlords.

According to Yolande Barnes, the head of residential research at Savills, the emergency budget supported Savills’ analysis that the general UK housing market will experience a second fall in values during the course of the next one-two years. ‘We anticipated as long ago as the summer of 2009 that the housing market would see further falls in 2010. The Chancellor today outlined some of the forces and factors behind this prognosis and gave us no reason to revise our views,’ Ms Barnes commented.
‘The pain will fall on just about every household in Britain and this will undoubtedly curb consumer confidence. The effect will be to suppress spending and that will include spending on homes. Some markets have already stalled in the run-up to the Budget and it is probable that post Budget sentiment will continue to suppress transaction levels,’ she added.

As the cuts put forward in the emergency budget are harder on some regions than others, properties in the north of England may well suffer the most, according to Ms Barnes. ‘More worrying is that austerity measures will work against mortgaged owner occupiers and will pose a real threat to those seeking to re-mortgage,’ she concluded.

On more welcome news, she enthused about government plans to examine the effects of the recent stamp duty holiday, perhaps in an efforts to transfer the burden of the stamp duty tax from the buyer to the seller.

 ‘We continue to urge the Government to consider transferring the burden of this tax from buyers to sellers. This would have the effect of removing the barrier to first time buyers at no cost to revenue,” she said. 

Second Home Tax In The Works

[ Posted May 18th, 2010 ]

Proposed policy changes immediately following the election results have put many home owners up in arms and the Prime Minister on the defensive as Cameron proposes a hike to the value added tax rate for all properties that are a home owner’s second home – raising the current 18% rate for the same homes up to 40 to 50 percent.


This move, as explained by Cameron, is designed to help curb the current market trend where many home owners already with substantial portfolios of their own are looking to take advantage of the currently low mortgage rates offered on both tracker and fixed-rate mortgages to expand into the market, pushing many other prospective buyers – including nearly a whole generation of first-time buyers – out of the market entirely.


Opponents to the move claim that this will effectively target the backbone of the UK society, the middle class, and force them to pay penalties to help support other struggling families that have found themselves in a difficult position due to poor debt management. Additionally they feel that this will be a direct blow to many who have developed their own wealth through hard work and dedication to developing their surroundings while offering jobs to countless individuals.


Supporters for the move, including Cameron, have backed this proposed tax rate increase as a fair way to provide greater opportunities for all and encourage much more comprehensive support for all residents throughout the country. Additionally they feel this will be a boon rather than a burden to those entrepreneurial individuals that wish to develop businesses as the new tax does not target any business-related dealings and will enable businesses to still benefit from significantly lower tax rates than they may face otherwise.


The proposed bill is still up for discussion, though as of this moment Cameron is losing many of the Tory supporters he relied upon to secure the election over the past few weeks due to this new possible new change and the lack of trust in many of the promises he made pre-election.

Prime sector fearful of ‘mansion tax’

[ Posted May 6th, 2010 ]

The general election has certainly stirred up strong feelings among the electorate, and many political slogans have been thrown around. One of the strongest, with regards to social fairness, is the so-called ‘mansion tax’ put forward by the Liberal Democrats, and despite capturing the public imagination, some at the high end of the property market predict that such a tax would have a negative, turbulent effect. The tax itself would introduce a levy of 1% of properties costing more than £2 million, and it has certainly provoked debate. Critics of the scheme believe that owners of such properties will be served with yearly tax bills of £20,000 in addition to any other mortgage payments they may need to make.

Despite this, the Liberal Democrat manifesto specifies that the tax itself will only apply to  ‘the value of the property above the level of £2 million”. As a result, the restrictive effects on the prime market cited by critics of the scheme may not materialise. According to property analysts,estimates that homeowners that are faced with the tax will end up paying an average of £32,270 more per year in tax are somewhat hysterical.

Despite the fact that a Liberal Democrat election victory might be hard to imagine, a mansion tax of the type described will not be as dramatic as people fear in the event of a win for Nick Clegg of May 6th. Homeowners will, however, be faced with an additional £1,000 in tax for every £100,000 of the value of their property above £2 million – not so pleasant new for overseas investors holding hefty overseas mortgages or those home owners with recent re-mortgages to pay for further investments.

Some analysts feel that this could result in a market distortion as those owners with properties worth a little over the £2 million threshold will look to have them undervalued in order to circumvent the tax. Irrespective of the actual level of tax homeowners would need to pay, analysts are in agreement that, in regional terms, London and the South East of England would be most affected by the tax, with over three-quarters of the tax burden falling on homeowners in the Kensington and Chelsea areas alone.

Retirees Looking to Downsize and Share Ownership

[ Posted April 15th, 2010 ]

With the possibility of the inheritance tax being set at starting at £350  a large number of elderly land owners have joined a new housing bracket: downsized share ownership housing. Rather than re-mortgaging and using current assets to develop investment portfolios for their children that may have to pay substantial inheritance taxes on any received estate, even though there are many good mortgage rates available on established homes today, people are finding it better to sell-off larger homes to free up additional cash while still maintaining a good quality location and home size.


Share ownership offers many retirees a chance to purchase part of a home as their own and rent the rest, generally from a property management company, and therefore allow them even improve their current living location to better locales without needing to substantially increase their costs. This is especially important today where a large number of overseas investors are entering into the market and putting additional pressure on the already strained local offerings.


Depending on the outcome of the election the interest in share ownership homes may continue to increase substantially, with many individuals potentially seeking out offerings in various areas to avoid unnecessary inheritance tax liabilities. Still, should the inheritance tax bracket stay somewhere in the £1m range there is a high probability as well that the current trend will be curbed and owners may choose to retain their properties in various locations to pass on to others rather than liquidate now. Whether or not this will eventuate is still in the air, though, as the number of possibilities surrounding the election are causing quite a stir in many sectors with a large number of market watchers paying close attention on the outcome to see just how the market will flow and make their move accordingly when the time is right.

Stamp Duty Possible Blow to London Property Market

[ Posted April 6th, 2010 ]

With the new Stamp Duty to help provide support for first-time buyers in particular purchasing homes up to £250,000 a new addition was added to the regulation – a 5% tax on all homes purchased valuing £1 million or more. While this may not seem like it applies to many people (and in fact does not in most areas) it is particularly troublesome for London where roughly 83% of all UK homes values over £1 million are located.


This move is seen as potentially dangerous to many developers and potential buyers in the London area that are looking at investing in higher-end property as the additional 5% requirement can add substantial burdens to many purchasers, especially if they are already having difficulties for whatever reason securing a good mortgage for their home. Many people speculate that this may even encourage greater interest from overseas investors rather than domestic purchasers which has been met with mixed reviews by many financial analysis and local London residents alike.


Thankfully for most first-time buyers the markets outside of London are still relatively flexible and open for investment, though at the same time these may not be as appealing as other neighbourhoods found within the greater London area. Still, with the primary concern on most minds being simply having the ability to purchase a home comfortably rather than purchasing a particularly large home or one that holds a high level of prestige this topic has become a primary issue for upper-end purchasers rather than a concern for the general market.


On a positive note the raising of the Stamp Duty threshold from £125,000 to £250,000 has been met with numerous cries of relief from many individuals looking to purchase a home as the higher break means substantial relief, particularly for those who may be having troubles coming up with the initial deposit required in the first place to purchase their first home.

Inheritance Tax-The Basics

[ Posted December 20th, 2009 ]

We are now altering our habits in terms of giving property over, with people taking advantage of policies such as reverse mortgages to combat the rising care costs of looking both ourselves and other family members in the latter years.

However for many of us, the giving of property is something that stands out in our minds as one of the key things we can pass on to our loved ones after our passing in terms of financial contributions.
But there are some important things to think about when you are considering the transition of your property to others.
The main thing that many individuals fail to cover is the issue of inheritance tax.
Currently the inheritance tax threshold for all a deceased assets lies at £325,000, including both the property and any other equity.
Inheritance tax can be quite a shock for the unprepared as it is charged at 40% on amounts over the threshold, meaning if you have a house of £425,000 then you must pay an immediate bill, or instalments to the value of £40,000.
As it is unlikely that most households will be able to raise the required cash then the house must then be sold to release the houses in tenants in common’ and therefore this will mean deductions are first taken from other assets and the remainder, if any is then still applicable. Tax on properties sent into trust are subject to a discounted rate of 20%

Another option is to sign over your house as a one-time gift to a next of kin, however this must be completed 7 years before your death, the downsides of this obviously are that you don’t live in a house that you own, requiring that there are matters beyond control that must be accounted for, does you next of kin live in a financially stable situation for example? If not then this may not be the best option.

Whatever the options you pursue then it may be wise to start planning early to make sure your loved ones are not left with a financial burden.

Housing Tax-Make Yourself Aware of the Changes

[ Posted November 30th, 2009 ]

There has always been a lot of shifting in the taxes governing the property markets.

This period is no different. The Liberal Democrat party has announced that should they be elected they intend to introduce a levy on homes valued over £2 million, this is following an announcement that the figure was to be £1 million, however it was quickly changed following criticisms that it was too low, those people hit would be those with high equity but restrained liquidity, namely those in the more expensive south west and elderly pensioners.

The higher threshold will reduce the number of homes potentially affected; now affecting around 75,000 rather than the original plan which would have affected 250,000. To balance the books however they have now increased the rate from the original 0.5% to 1% of the house value. For many this would mean taxes of over £5000 per year. For the average person this is a significant amount.

The thinking behind this tax is obviously that people who live in expensive houses can afford to pay more tax. However, is this true? Is the price of a person’s home directly related to their cash liquidity and therefore their ability to pay tax?; is this tax fair?

Recent studies have shown that in many cases, while there is a correlation between house price and income, this doesn’t necessarily mean that there is a link with a person’s liquidity.

For those wishing to invest in homes, especially those over a threshold of around 500,000 this may actually be something to think about if they are planning for the long term or as an investment in which the profit margins are not too great. In the last boom, house prices went up dramatically, for many this was beyond their initial expectations and though their equity may have gone up , in the boom peoples wages had not. Thinking about these future changes and making yourself aware of both existing and impending laws could make a big difference to the house buyer.

Government Is Set To Put Back Stamp Duty- The Return Of The Stamp.

[ Posted November 17th, 2009 ]

For many people in the UK, stamp duty is a rather unwelcome addition to the stress and burden of buying a home, and for those not prepared it can be a financial slap in the face. As a quick introduction, stamp duty is basically a tax imposed on anything that has a ‘chargeable consideration’ that is; the government imposes a tax on the movement of financial assets of significant value, a house is considered one of these.

For the home buyer they need only concern themselves with the SDLT or Stamp Duty Land Tax, which is imposed on most properties in the UK. This tax, although small on paper at 1% of the total houses sale value, (and increasing incrementally for houses over this value up to 4%) can be quite a hit to the already straining wallets of groups such as first time buyers and many groups, led by the National Association of Estate Agents and the Association of Residential Letting Agents, is also calling for reform on the current stamp duty system, which is seen by many to be outdated and to cause unnecessary strain in already weak housing markets.

Recently the government has given home owners with household values of under £175,000 an exemption from this tax to try to stimulate the sluggish markets, however as of 31st December 2009 this exemption is due to end and looks to return to the original value of £125,000. For many home owners this is not an issue, despite price drops, many house prices remain above the threshold set and will have no effect. This is especially true in the south. However those to be aware should be the owners in the north of England, Wales and Scotland where many of the house prices range just below this figure at an average of around £116,000. Those looking to move soon might want to consider doing it before the New Year.

Some property taxes to rise in the UK

[ Posted September 25th, 2009 ]

In property tax news from the UK, the Liberal Democrat party announced yesterday that a new property tax will be imposed on residential real estate worth over £1 million.

The new “Mansion tax” would be 0.5% of the property’s value. Owners of a £1.5 million home would pay an extra £2,500 a year in tax. For a £4 million property, the figure rises to £15,000.

Treasury spokesman Vince Cable said that this tax would raise more than £1 billion that would be used to raise the income tax threshold in the country to £10,000.

On the other hand, many in the property industry believe that real estate taxes should be based on ability to pay, not on how much your property is valued at.

They point out that the tax will be heavier on those living in London and the south east of the country where property prices are higher.

The Royal Institution of Chartered Surveyors warned that it is not a very practical way to raise revenue from property ownership.

‘Although taxes on properties over £1 million may be an effective way to raise additional funds, RICS sees a number of practical problems.’

‘These include the need to ensure that valuations are fair and accurate, given that the last valuations were done 18 years ago; the cost of administration given the likely number of appeals; the ability to pay, since the proposed tax is based on the value of the property and not the owner’s income; and the potential market distortion such a tax would create. aims to provide every client with cheap, affordable and best mortgage loans in the UK market, however the actual mortgage rate available will depend on client's financial circumstances and credit history. Although, has made every effort to ensure that the mortgage rates listed are correct, it bears no responsibility in case of an error. 
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