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Em Morley

Lib Dem Mansion Tax Bands Revealed

Published On: April 14, 2015 at 3:20 pm

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The Liberal Democrats have announced that homes worth between £2m and £2.5m would face an annual mansion tax of up to £2,000 if they come into power.

Nick Clegg revealed details of the mansion tax bands on Sunday and also explained that the party have cut back on how much the policy would raise, from £1.7 billion to £1 billion.

Initially, the Lib Dems proposed a 1% tax on all properties worth over £2m, but last year they said that a banded system would be used instead.

Lib Dem Mansion Tax Bands Revealed

Lib Dem Mansion Tax Bands Revealed

Mr. Clegg said: “It is less than originally mooted but because as we have worked up the idea, looked at what we think is reasonable and fair, we think this is a reasonable and fair way of doing it and shouldn’t scare the horses.”

He claimed that the banded charges would be “much, much lower than some of the breathless predictions I have heard.”

For homes worth between £2.5m and £3m, the tax would be capped at £3,500, for those between £3m and £4m it would be capped at £5,000, and for £4m to £5m properties, £9,000.

Opponents state that the tax is unfair for those living in London and the South East, as these parts will be disproportionately affected due to high house prices.

Mr. Clegg defends the system, saying it is “in effect taking the same principle as you already have in the property tax system, Council Tax, and extending it in bands upwards.”

He added: “There is no rational reason why lots of people in lower value houses should pay property tax through the Council Tax system in bands, but people in much higher value properties should not.

“I think, you’ll certainly find as I explain that to people who are concerned about what this means, they will accept it’s not fair to have a property tax system which ends at around £700,000. It’s not fair for a family home in Lewisham pays the same property tax as an oligarch in a vast mansion.

“What we’re saying is we’ll extend the same fair banded approach up the value chain.”1

The Labour Party has also planned a mansion tax, which would involve properties between £2m and £3m paying £250 a month, or £3,000 a year. Labour are yet to detail higher bands.

1 http://www.telegraph.co.uk/news/politics/liberaldemocrats/11531487/Nick-Clegg-unveils-mansion-tax-bands-starting-at-2000-a-year.html

Nationwide House Prices to Outperform London

Published On: April 14, 2015 at 2:33 pm

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Property prices around the UK will surpass those in London this year, housing analysts expect.

House prices are predicted to increase by 1.5% nationwide, but drop by 3.6% in the capital in 2015. This would be the first time in six years that the rest of the UK outperforms London.

These forecasts come from the Centre for Economics and Business Research (CEBR), which says the changes will come after “years of over-performance”.1

The fall in London prices are not expected to last for long and by 2016, values are predicted to rise by 2.7% in the capital and 2.3% around the UK.

Nationwide House Prices to Outperform London

Nationwide House Prices to Outperform London

The CEBR explains that the London property market is more likely to be affected by concerns over the general election, but that long-term, underlying issues such as the economy and housing supply will push prices higher.

CEBR economist Nina Skero says: “Outside of London, the outlook for house prices this year has improved after a few months when the market appeared to be coming off the boil. December’s Stamp Duty changes, as well as rising household incomes, are lifting prices in many parts of the UK.

“In London, however, we expect prices to decline by 3.6%, driven by a significant weakening at the prime end of the market. A potential mansion tax, reduced overseas interest and hefty new Stamp Duty rates have hit demand for high value property.”1

In January, the CEBR expected house prices in the UK to decrease by 0.6% this year, but it has now amended this estimation, citing Stamp Duty reforms, which have made it cheaper for the majority of payers, and the immediate affect they have had.

After the property market recovered in 2014, London prices increased by 17.4%, and the rest of the UK experienced rises of 10%.1

At the end of 2014, experts reported a more equal housing market around the UK, as price increases spread out from London to other parts, as buyers moved away from the capital.

Buyers became wary of stricter mortgage lending criteria and high asking prices.

CEBR claims that demand from foreign investors in the London market has been affected by the strength of the pound against the euro, the possible mansion tax, and higher Stamp Duty for high-end London homes.

It also says that they expect prices to drop in London, as there are fewer buyer enquiries and houses are taking longer to sell.

They reveal that the drop in overseas buyers affects the rest of the UK a lot less than London, and that those living outside the capital are benefitting from the Stamp Duty changes.

1 http://www.theguardian.com/business/2015/apr/13/uk-wide-property-to-outperform-london-analysts-forecast

1,400% Returns Create 2m Buy-to-Let Landlords

Published On: April 14, 2015 at 11:08 am

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Buy-to-let landlords have achieved yields of around 1,400% since 1996, making it the best investment.

1,400% Returns Create 2m Buy-to-Let Landlords

1,400% Returns Create 2m Buy-to-Let Landlords

If someone put £1,000 into a rental property in 1996, it would have grown to £14,897 last year, revealed a report. This is six times the amount shares would have earned and over 14 times the return from leaving the money in a cash account.

These figures show how rewarding the property industry has been in the last two decades, even creating some multi-millionaire investors. However, campaigners who believe that buy-to-let landlords increase house prices and make it harder for first time buyers to get into the market, will be concerned by the findings.

Economists illustrate the incredible yields with someone buying a buy-to-let property at the end of 1996, when the average house cost £55,000, with a 75% loan-to-value (LTV) mortgage. The investor would have made a huge 1,390% profit on their money by 2014, in which time rents rose sharply and the average property price reached £189,000.

This would cause 16.2% growth annually, the research by Wriglesworth Consultancy for peer-to-peer lender Landbay found.

Comparatively, if £1,000 had been invested in commercial property, between 1996 and 2014 it would have risen to £4,494, in UK government bonds it would now be worth £3,329, and in UK shares to £3,119. Put into a cash account, the money would have been worth £1,959 last year.

 

The report says: “What this scenario helps to illustrate is how buy-to-let has not only provided very strong returns for average investors since 1996, but how it has enabled a cohort of ambitious investors to become seriously wealthy.”

It adds that strong property price growth and the chance to expand property portfolios “has allowed a new class of millionaires to emerge in a way that has generally not taken place with investors in the other asset classes we have considered.”1

Comparing returns

The following figures indicate how much £1,000 invested in 1996 would be worth now.1

Investment

 Worth

Return
Buy-to-let property £14,897 1,390%
Commercial property £4,494 349%
UK government bonds £3,329 233%
UK shares £3,119 212%
Cash account £1,959 96%

Buy-to-let has boomed since mortgage providers introduced specialist offers in 1996. There is now estimated to be 2m private landlords in Britain, owning almost one in five homes. Pension reforms launched last week, that allow over-55s to withdraw money from their retirement savings, have caused worries that buy-to-let will expand even further.

The Government predicts that private landlords will own one in three properties in 2032.

Halifax revealed recently that tenants are giving up their dreams of owning a home. Read more about it here: /tenants-give-homeownership-dream/.

Lending to buy-to-let landlords increased by 12% year-on-year in January, revealed the Council for Mortgage Lenders (CML). In the same period, the amount of loans offered to first time buyers dropped 14%, falling to the lowest monthly level for 21 months.1

1 http://www.dailymail.co.uk/news/article-3036279/Proof-buy-let-property-really-best-investment-1-400-returns-help-create-2million-private-landlords.html

 

HSBC Turn Down Couple for Mortgage Due to Their Age

Published On: April 14, 2015 at 9:04 am

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Mortgage provider HSBC has acted in an ageist manner after declining a couple’s loan application.

HSBC Turn Down Couple for Mortgage Due to Their Age

HSBC Turn Down Couple for Mortgage Due to Their Age

The bank has become the first to be penalised for age discrimination towards consumers, after they turned down a married couple in their forties who applied for a £250,000 mortgage.

The lender initially agreed to the loan, but renounced the offer, as the husband would be over 65 when the 18-year deal ended. Bosses have defended the decision, stating that they are permitted to have a maximum age policy.

However, the Financial Ombudsman Service said that the bank acted unfairly and ordered it to pay £500 in compensation to the couple.

The Ombudsman says: “The bank relied on untested assumptions, stereotypes or generalisations in respect of age.”1

The loan was an interest-only mortgage on the couple’s home, in which they had substantial equity.

The husband says that he does not plan to retire at 65 and if he did, his final salary pension would still cover the payments. The Sunday Times also reported that his wife would have been able to cover them out of her salary.

HSBC says: “As a responsible lender, we need to ensure our customers’ ability to repay their mortgage. With interest-only lending we also need to understand how a customer will repay the capital when the mortgage matures.”1

1 Le Marie, N. (2015) ‘Over 40? Sorry, you’re too old for a mortgage’, Metro, 13 April, p.1

Chelsea Mansion Sells for £51m

Published On: April 13, 2015 at 2:15 pm

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A home that has been described as the perfect property has sold for £51m in Chelsea, London. The house has become one of the most expensive in the UK and came with a £7.6m Stamp Duty price tag.

The West London home was sold for 300 times the average house price in England and Wales. It is one of the most expensive houses to ever sell in the UK.

The house is also 18 times the size of the average new build, and has nine bedrooms, nine bathrooms, a cinema, a Japanese water garden and an indoor swimming pool over four floors.

The owner commissioned the mansion, and originally put the house on the market for £55m. An offshore company bought it for £51,191,950, Land Registry data reveals.1

The property is found on Boltons Place, in The Boltons, a street containing late 19th and early 20th century mansions.

The Stamp Duty bill, equivalent to 15%, is the consequence of the buyer using a Bermuda-based firm to purchase the house. There is also a further bill of £218,200 per year, as the Annual Tax on Enveloped Dwellings (ATED) is payable by companies that own residential property in the UK.

The home was described by estate agents Knight Frank’s Knightsbridge office as an “exceptional detached recently built mansion” that was “presented in immaculate condition throughout.”

The advertisement stated: “The intention from the outset was to bring together the very best in the fields of construction and building services together with the most accomplished artisans and craftsmen to create and build the perfect house.

“Only materials of the highest quality have been employed by the most skilled workmen in order to create a house of unparalleled and exacting design.”1

Three developers bought the site on which the 17,500 sq. ft. house is built for £15m in 2002. The site used to be home to a BT telephone exchange. The building was demolished and Barrett Lloyd Davis architects were commissioned to design three mansions. Walter Lilly & Company built the houses, completed in 2006.

Property consultant Simon Barnes called the property “the perfect home.”

He continues: “The properties weren’t built by developers to sell, they were built for them to live in.

“They are amazing. There is a spacious hallway, very good reception rooms and bathrooms. They are as near a perfect home as you can get: great for entertaining in and great for living in.

“In Prime Central London, 99% of these houses are listed or in a conservation area so you can’t just rip one down and rebuild it. Boltons Place was built on an old telephone exchange. In Prime Central London it is unique. The sale represents great news for the Treasury and the owner has a wonderful new home.”1

Managing Director of Hanover Private Office, Alex Newall, says: “Boltons Place is well laid out and in a superb location. There are only a handful of homes like this in London. The ceilings are four-metres high, there is a massive lift, the master suite takes up a whole floor; it really is an awesome space.

“There is demand, but it is the availability that is the problem. Most streets are listed so it is difficult to find somewhere to build a house like this. A lot of people will keep the façade, but rebuild the house behind it.”1

Buying agent Henry Pryor concludes: “Strange though it may seem, this property looks good value when you consider what you could pay for flats in one of the posh new developments in Knightsbridge and Mayfair.”1

1 http://www.dailymail.co.uk/news/article-3032283/Buyer-shells-51million-perfect-mansion-making-one-UK-s-expensive-homes-pay-stamp-duty-7-6million-top.html

 

Tenants Give Up on Homeownership Dream

Published On: April 13, 2015 at 10:13 am

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A survey has revealed that many renters in Britain are giving up on the prospect of owning a house as high property prices and a lack of pay rises pushes hopes further away.

The study, by Halifax, discovered that only four in ten tenants (43%) are saving for a deposit for a home, compared to around half (49%) last year.1 The research questioned 40,000 people aged 20-45.

Halifax also found that three-quarters of respondents worry that they won’t ever be able to afford a property of their own. This rose to eight in ten Londoners, where prices have increased by double-digits recently.1

Tenants Give Up on Homeownership Dream

Tenants Give Up on Homeownership Dream

Halifax’s Generation Rent report states that these figures strengthen “the view” that more people are giving up their dream of owning a home and are accepting the idea of renting for the long-term.

It says that if people do lose the hope of homeownership, “a lower level of homeownership will become the new normal” and “the presumption that the UK is obsessed with homeownership may soon become a myth.”1

The research indicates that the three most common obstacles to homeownership are large deposits, high house prices and low wages.

Tenants say that they are happy to save for around five years and four months to save a deposit, however, even this can leave people unable to purchase a home.

The Government’s Help to Buy scheme has helped people get onto or move up the property ladder with a low deposit. Half of people think this has been a positive step, whereas 8% believe it has had a negative effect, saying that it has fuelled demand, pushing up prices.1

Furthermore, three-quarters of respondents think banks are reluctant to lend to first time buyers. However, the Council of Mortgage Lenders (CML) found that the amount of first time buyers entering the market was the highest level since 2007 last year. Over 300,000 people bought their first property in 2014.1

Mortgages Director at Halifax, Craig McKinlay, says: “While there has been an increase in first time buyers in the last 12 months, at the same time there is also a growing group of young people who believe they won’t be able to get a mortgage.

“The difference between the reality and their perception needs to be addressed urgently if we are to prevent people from giving up on getting on the housing ladder.”1

1 http://www.dailymail.co.uk/news/article-3028091/Generation-giving-buying-home-High-prices-poor-pay-rises-mean-just-four-ten-renters-aged-45-saving-deposit.html