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Nick Conner

Posted 30 November 2015
by Nick Conner

Property update November 2015

Increase in Stamp Duty Burden

The Treasury’s Spending Review and Autumn Statement has significantly increased the level of stamp duty payable by purchasers of second homes and buy-to-let properties, where those purchases complete on or after 01 April 2016. The rates paid by these purchasers will be 3% higher than the stamp duty payable by owner occupiers. The Daily Telegraph [1] has published a useful specimen table below to give readers an idea of the impact, which will be harder felt by investors at the top end of the market:

Value of second property/buy to let (£) Current SDLT (£) SDLT from 1 April 2016 (£) Increase in tax (£)
150,000 500 3,800 3,300
250,000 2,500 8,800 6,300
350,000 7,500 16,800 9,300
450,000 12,500 24,800 12,300

No policy detail has yet emerged to confirm what exemptions will apply, for example if a property purchase completes on 01 April 2016 but contracts were exchanged prior to that date, it is unclear whether the higher rate will be payable.
In terms of assessing whether a property is a ‘second home’, will the stamp duty forms be amended to include a declaration as to whether the owner intends to live in the property as their main residence? No doubt further detail will emerge in due course but it does leave investment buyers, particularly those buying new-build properties scheduled to complete after 01 April 2016, with a period of uncertainty.

With regards to known exemptions, it is confirmed that the higher rates will not apply to purchases of caravans, mobile homes or houseboats, or to corporate entities or funds making significant investments in residential property. The government will consult on the policy detail, including on whether an exemption for corporate entities and funds owning more than 15 residential properties is appropriate.

London Help to Buy Scheme

In recognition of the difficulties facing London residents trying to get on the housing ladder, a new London Help to Buy scheme has been established whereby buyers who have a 5% deposit can obtain an equity loan of up to 40%. The loan will be interest-free for five years. This will mean that buyers will need a mortgage of up to 55% of the value of their new home. This is a big change when compared with the national Help to Buy Scheme, which only allows for an equity loan of 20%.
It will be interesting to see how home owners who have purchased under the Help to Buy Schemes react once the interest-free period finishes. While many owners may be able to absorb the interest payments, those on tighter incomes may have to consider selling up. If a number of owners in the same area are in a similar boat, prices in that area may fall as a consequence of the increased supply.

Decrease in Mortgage Approvals

According to the British Bankers’ Association, mortgage approvals for house purchases in September fell to their lowest point for four months. Saying this, the figures are positive when compared to the data from September 2014 (a 17% increase).
The view of Howard Archer, chief UK and European economist at IHS Global Insight, is of a perception that an imminent interest rate increase looks unlikely:
“It may be that mortgage approvals had been lifted in recent months by a significant number of house buyers looking to move quickly to try and lock in a low mortgage interest rate before they start rising. It is also possible that lower mortgage approvals in September is a sign that housing market activity is being constrained by a shortage of properties on the market.”

A house for £9,000 (new carpets included)

Having recently dealt with the sale of a one-bed Chelsea flat for over £600,000, we were amazed to hear that further afield, one can purchase a three bedroom house in Burnley for a mere £9,000 – surely a bargain in anyone’s books.
The house boasts a fitted kitchen, rear garden and on-street parking. Before anyone gets too excited, the comments at the foot of the article imparting some local knowledge do question (put in perhaps stronger terms) the kerb appeal of the property.

Further advice

If you have any queries regarding the contents of this update, please contact Vernon Clarke on 01392 667672 (v.clarke@tozers.co.uk), or Nick Conner on 01392 667693 (n.conner@tozers.co.uk).

 

[1]http://www.telegraph.co.uk/finance/personalfinance/investing/buy-to-let/12016569/New-buy-to-let-stamp-duty-How-much-will-you-pay.html

 

 

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About the author

Nick Conner

Nick Conner

Partner

Conveyancer and partner in the private client department