Posts with tag: Benham and Reeves

Capital gains tax research reveals areas where landlords have been hit hardest

Published On: November 25, 2022 at 9:54 am

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Categories: Landlord News

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Landlords want government to reverse capital gains tax changes

Changes to capital gains tax announced in last week’s Autumn Budget will see the average landlord pay as much as £1,764 more if they do decide to exit the buy-to-let sector come the 2023-24 tax year, says London lettings and estate agent Benham and Reeves.

Benham and Reeves analysed the capital gains seen on a buy-to-let investment across each county of England over the last nine years, as they’ve found this is the average length of time a landlord owns their portfolio. They also analysed the current tax payable if landlords exit at both the basic and higher rate of tax, as well as how this differs to what they will pay once changes to the capital gains tax allowance come into force from next year.

Capital gains for the average landlord

The research shows that, with the current house price across England now sitting at an average of £314,278, the average landlord has seen capital gain of £130,000 over the last nine years based on the latest available house price data from the Land Registry.

Previous capital gains tax paid on their portfolio

With the current capital gains allowance of £12,300, the agent says £117,704 of this £130,000 increase in property value is currently liable for capital gains tax. As a result, the average landlord offloading their portfolio and paying the basic rate of tax would pay £21,187 in capital gains tax today, while this figure climbs to £32,957 for those paying the higher and additional rates of tax.

Current capital gains tax paid on their portfolio

However, with the capital gains allowance now changing to just £6,000 come the 2023-24 tax year, the average landlord looking to offload their portfolio could be facing a bill of £22,321 at the basic rate and £34,721 at the higher and additional rates of tax. 

Those on the basic rate of tax might see their potential capital gains tax bill climb by £1,134, while those paying the higher and additional rates of tax could see an increase of £1,764.

Highest capital gains tax bills

When these changes come into force next year, Surrey will experience the highest capital gains tax bills. Landlords in this county looking to exit the market could be facing a capital gains tax bill of £38,167 at the basic rate and £59,371 at the higher and additional rates based on the capital appreciation of their investment over the last nine years. 

London ranks second, with those paying a basic rate of tax facing a capital gains tax bill of £36,922 when exiting the buy-to-let sector. Those paying the higher and additional rates of tax could be paying £57,435.

Buckinghamshire, Hertfordshire, Bath and North East Somerset, Bristol, Essex, Oxfordshire, Kent and West Sussex are also home to some of the highest capital gains tax bills of all counties in England once capital gains tax changes are implemented.  

Marc von Grundherr, Director of Benham and Reeves, comments: “Given the fact that the Government has consistently refused to address the housing crisis and instead persisted in fuelling demand in order to keep house prices soaring, it’s understandable that many landlords feel a little aggrieved at having to pay such a heft lump in tax simply because the value of their investment has soared. 

“This tax bill has only grown all the larger as a result of the Autumn Budget and the latest government attack on the nation’s landlords in the form of a reduced capital gains tax allowance. 

“Buy-to-let remains one of the safest investments you can make and the right investment is still incredibly profitable. So the latest hikes to capital gains tax are unlikely to deter both the institutional and amateur investor. 

“However, it’s clear the government is intent on reducing this profitability and one must wonder just how many minor government cash grabs the nation’s landlords are willing to take, before they decide enough is enough and exit the sector.”

House prices are still up year-on-year, latest government report shows

Published On: November 21, 2022 at 3:12 pm

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Scrapping mortgage tax relief hike would ease rental supply crisis says new research

Average house prices in the UK have increased 9.5% annually, according to the latest government report.

The September UK House Price Index shows the average price of a property in the UK was £294,559. There was a monthly change of 0.0%.

Property industry responses to the UK House Price Index

Marc von Grundherr, Director of Benham and Reeves, comments: “The property market has continued to weather the storm of late and while we may have seen a reduction in buyer demand due to higher mortgage rates, we’re simply not seeing any downward pressure applied to sold prices, despite a static rate of growth on a monthly basis. 

“This is largely due to the fact that buyers have been keen to transact at pace in order to secure the rates currently on offer, before they climb even higher. In doing so, they’ve helped to maintain a consistent level of activity in the process which has kept the market afloat.”

James Forrester, Managing Director of Barrows and Forrester, comments: “It’s incredibly hard to gauge the true health of the UK property market at present, with increasing mortgage rates leading to a period of turmoil, followed by a renewed level of certainty as a result of a government refresh.”

Chris Hodgkinson, Managing Director of HBB Solutions, comments: “All current indicators suggest the market is starting to freeze over with homebuyers giving the idea of homeownership the cold shoulder following a sizeable uplift in the cost of borrowing. 

“This declining level of buyer demand is yet to cause house prices to actually fall, but the tide is starting to turn, and with the market now slowing right down until spring we can expect property values to follow suit sooner, rather than later.”

Latest government data reveals average UK house price

Published On: October 20, 2022 at 9:26 am

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UK property values fell for first time in 13 months in November 2022

The latest government UK House Price Index shows that the average price of a property was £295,903 in August 2022.

The report also states house prices increased 13.6% year-on-year and 0.9% month-on-month.

Property industry reactions to latest house price data

Iain Crawford, CEO of Alliance Fund, comments: “Despite the government’s best efforts, we are yet to see house prices take a hit and the property market remains predictably resilient despite the turbulence of the wider economic landscape. 

“However, although Jeremy Hunt has pulled an almost complete three sixty manoeuvre where tax cuts are concerned, the irresponsible management of the UK economy in recent weeks will understandably unsettle the nation’s homebuyers. 

“Many are already facing a notable hike to the monthly cost of their mortgage and while the increasing cost of borrowing is now likely to plateau, we can expect to see some form of house price correction. That said, this will most probably come in the form of a reduction in the rate of growth rather than a downward spiral in values themselves.”

Marc von Grundherr, Director of Benham and Reeves, comments: “If history has taught us anything, it’s that it will take far more than a bumbling bunch of buffoons mismanaging the economy from Westminster to topple the UK property market. 

“House prices continue to climb and this will remain the case as long as the buyer demand balance remains tipped firmly in favour of home sellers. 

“Mortgage rates also remain fairly favourable at present and so we simply won’t see a house price dip while this remains the case. However, the increasing cost of borrowing may curb the enthusiasm of homebuyers when it comes to their ferocity during the negotiations stage and so sellers may no longer see their property achieve above and beyond their asking price expectations, as has largely been the case during the pandemic.”

James Forrester, Managing Director of Barrows and Forrester, comments: “While the UK government may be a laughing stock, the UK property market is far from it and continues to move forward at pace despite the chaos that has unfolded across the wider economy. 

“A commitment to cutting stamp duty will certainly act as the cherry on the cake for many homebuyers, but it’s their continued ability to borrow in order to buy that will keep the cogs of the property market turning. 

“As it stands, they remain more than able, with the majority of lenders still offering a great level of products at what remain favourable rates. With stability now returning to the gilt markets, we can expect the mortgage sector to level out after what has been a rough few weeks and this will ensure the market remains in good health over the coming months.”

Chris Hodgkinson, Managing Director of HBB Solutions, comments: “It’s not just the nation that is facing a tough few months ahead with potential energy blackouts, we expect to see the property market follow suit as a shambolic government performance leaves its mark where house price growth is concerned. 

“While the market remains unfazed at present, it’s important to note that these figures are reported on a lag of a few months and there’s no doubt that the increasing cost of borrowing will have dampened buyer activity, which in turn will see house prices dip before the year is out.”

Demand has increased for London bills included rental properties

Published On: September 21, 2022 at 9:36 am

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Categories: Lettings News,Tenant News

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Rental data reveals London has become unaffordable for graduates

Demand for rental homes with bills included within the cost of renting has climbed considerably since April across London, research from lettings agent Benham and Reeves shows.

However, tenants are still paying a rental premium for this option.

Benham and Reeves analysed current rental stock available across the capital and found that currently only 5% offer to cover the cost of bills within the monthly rent.

Availability is at its highest in Brent, where 12% of all current rental properties listed on the market include the cost of bills within the monthly rental cost. This is followed by Hounslow and Barking and Dagenham (10%).

Benham and Reeves also found that 34% of rental properties that include the cost of bills within the rent paid have already had a let agreed, up from just 26% in April of this year.

The average rent for a London let where bills are included currently stands at £3,045 per month, a 51% increase on the £2,023 in April 2022. Rental properties without the cost of bills covered are understandably more affordable at £2,460 per month, although this cost is still up 43% since April 2022.

The average cost of monthly bills is now £321 across the capital, up 34% since April alone, says the lettings agent. Despite this increase, those paying their rent and bills separately are only paying £2,781 per month. That’s £265 less a month than the average rent for a property with bills included, a difference of £3,175 per year.

What’s more, back in April, the cost of paying bills and rent in one payment was just £59 (£711 per year) compared to those paying their rent and bills separately. That’s an increase of £206 per month or £2,464 per year since April, for those opting for the convenience of a rental home with bills included.

Director of Benham and Reeves, Marc von Grundherr, commented: “Many tenants prefer the convenience that comes with a rental property where all running costs are covered in one monthly payment along with their rent. Of course, this rental cost is going to be higher than a property where bills aren’t included and landlords may well charge more as a contingency for a less stringent approach to managing the consumption of gas, electricity and water.

“However, as our research shows, just a few short months ago it equated to an additional £59 per month which is a very manageable increase for such a heightened level of convenience. But since then, the cost of living crisis has spiralled out of control and the cost of running our home has been one of the driving factors behind this.

“Now the increase in asking rents for bills inclusive rental properties is huge, having increased by over £200 per month since April alone.

“Of course, this isn’t down to savvy landlords trying to offset their own high energy costs, it’s simply the reality of the world we’re currently living in.

“However, it’s important for landlords to consider just how much they may be in line to pay should they find themselves with a tenant who plans to work from home this winter, as it could leave them out of pocket even when charging a rental premium to cover the increase in running costs.  “At the same time, any landlord who does opt to keep the bills in their name may also find themselves liable should their tenant fail to cover these costs.”

Right to Buy generates over £3bn for London’s local authorities in the last decade

Published On: August 24, 2022 at 8:47 am

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Rental data reveals London has become unaffordable for graduates

Over 23,000 homes have been sold under the Right to Buy scheme to London council tenants over the last decade, research from lettings and estate agent Benham and Reeves shows.

It says this this equates to 5.6% of total local authority owned dwellings stock and equates to a total market value of £3.4bn. 

The analysis of historic Right to Buy data by Benham and Reeves shows that, since 2012-13, 23,061 council homes have been sold to tenants by their respective local councils.

Highest total Right to Buy sales

The highest number of council owned homes have been sold in Barking and Dagenham, where Right to Buy sales total 1,883 over the last decade. 

Greenwich has also seen a similar number sold at 1,867, followed by Newham (1,716), Southwark (1,702) and Tower Hamlets (1,187).

Highest proportion of total council homes sold

Across the capital as a whole, the total number of Right to Buy sales accounts for 5.6% of all local authority owned homes. 

In the City of London, just 62 homes have sold via Right to Buy, which accounts for 14.4% of all council homes located there.

Right to Buy in Newham has seen 10.2% of council owned homes sold. In Barking and Dagenham, the figure is at 9.8% and in Tower Hamlets it’s 9.5%.

Redbridge also makes the top five, with 9.4% of total council homes in the borough being sold via Right to Buy in the last decade. 

Highest Right to Buy sold value

The market value of homes sold via Right to Buy across the London market has hit a £3.415bn in the last 10 years, Benham and Reeves reports.

When it comes to the highest sold value, it’s the London Borough of Southwark that sits top. Right to Buy sales have generated £3254.5 million since 2012, with Greenwich (£223.5 million), Barking and Dagenham (£222.3 million) and Newham (£201.7 million) again making the top five. 

Islington also ranks as one of the boroughs to see the highest sold value of Right to Buy homes to council tenants, generating £198 million since 2012. 

Marc von Grundherr, Director of Benham and Reeves, comments: “Right to Buy may have been an incredibly successful initiative when it comes to giving council tenants the ability to climb the ladder and many have seized the opportunity to do so in the last ten years. 

“Of course, in doing so these local authorities have essentially shot themselves in the foot, as it severely reduces the social housing stock available to them to satisfy the huge demand from those who are still in desperate need of it. The irony is, that it then costs these councils more, as they need to rely on renting from the private sector at a higher price to house those in need. 

“As a result, we’ve now seen some councils start to reverse this trend and reclaim formerly council owned homes from their owners. Which does beg the question that, having made some quite sizeable sums from selling in the first place, why London’s local authorities haven’t invested appropriately in the provision of new homes for council tenants?”

House price growth stalls after record breaking period of growth

Published On: August 19, 2022 at 11:11 am

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UK property values fell for first time in 13 months in November 2022

The latest UK House Price Index from the Office for National Statistics (ONS) reports that average house price growth has slowed, compared to the previous month.

The main points in the ONS report include:

  • UK average house prices increased by 7.8% over the year to June 2022, down from 12.8% in May 2022
  • The average UK house price was £286,000 in June 2022, which is £20,000 higher than this time last year
  • Average house prices increased over the year in England to £305,000 (7.3%), in Wales to £213,000 (8.6%), in Scotland to £192,000 (11.6%) and in Northern Ireland to £169,000 (9.6%)

James Forrester, Managing Director of Barrows and Forrester, comments: “While both the monthly and annual rate of house price growth may have slowed quite considerably, the property market continues to march forward in fine form despite the fact that the rest of the economy is crumbling.

“Of course, many will be quick to flag a reduced rate of growth as a sign that a market crash may be looming, but this amounts to little more than premature waffle and it’s important that we view a slower rate of growth in context with the period of unprecedented boom we’ve just experienced. 

“House prices are still up on a monthly and annual basis and given the instability of the wider backdrop right now, this is proof, if it was ever needed, that property is the safest investment you can make.”

Marc von Grundherr, Director of Benham and Reeves, comments: “The UK economy is sailing head on into some very stormy seas at present, all while the captain remains on shore leave with no replacement yet to take the helm. 

“But despite this, the boat is yet to rock where the property market is concerned and the economic woes of rising inflation, increasing interest rates, and a cost of living crisis continue to bounce off the hull like mere pebbles rather than unforeseen ice bergs. 

“It’s inevitable that the property market was eventually going to slow from the high rate of knots it’s been moving at throughout the pandemic, but we’re yet to see any signs of it sinking and this is likely to remain the case.”

Chris Hodgkinson, Managing Director of House Buyer Bureau, comments: “It very much looks like a matter of when, rather than if, with regard to the UK entering a period of recession and this will further fuel the economic angst that is currently gripping the nation. 

“While the property market has stood firm so far, we can expect a far greater level of uncertainty, coupled with hesitations on both the side of buyers and sellers, to cultivate a much less settled outlook over the coming months.

“For those that do press on with a purchase, the ability to borrow will come at a greater cost and this will impact the price they are willing to pay, which in turn, will force sellers to lower their expectations when it comes to pricing their home for sale.”

Almas Uddin, Founding Director of Revolution Brokers, comments: “It’s a very real possibility that interest rates will rise to between three and four per cent in an attempt to curb the 40 year high in inflation we’re currently seeing. 

“Although this will still be a historically low rate of interest, it will no doubt startle a generation of homebuyers who have known nothing other than a sub one per cent base rate until recently. 

“The result of which is likely to be a reduction in buyer demand and a more modest approach to borrowing, with these factors causing the previously high rates of house price growth seen over the last few years to plateau further.”

Andy Sommerville, Director at Search Acumen, comments: “While the ONS HPI results show another month of house price growth, we can see that this growth has slowed significantly, and, if we look at other HPIs, we should expect negative growth to be reflected in future iterations of the ONS data.

“We are seeing the end of an era of consistent rapid house price growth and the start of a new chapter for the housing market characterised by economic instability. The data foreshadows what is likely to be a period where house price growth stalls or goes into decline as we are finally seeing rampant inflation and reactionary interest rate rises take the heat out of demand, which has been exponentially outstripping supply since the pandemic.

“It is incredibly difficult to predict where the market will go from here. The Bank of England is cautioning of a prolonged recession and, as we currently have a lame-duck government, we don’t know whether future policy interventions to ease soaring living costs might impact market dynamics.

“How deep a recession is, how bad inflation gets and how high interest rates go, will all determine what happens with pricing over coming months. Despite this economic uncertainty, it is unlikely prices will fall over a sharp cliff edge.

“Fundamental structural issues mean we have chronically low housing stock and even if demand falls away significantly this lack of supply will act to support prices. At the same time, while cost of living is now impacting demand, there are still powerful post pandemic lifestyle factors at play that are seeing buyers come to the market as they look to reset based on new patterns of living and working.

“As competing pressures force the market in different directions, it is likely that the push and pull effect of these dynamics will ensure market activity continues at a reasonable level for the foreseeable future despite economic headwinds.

“We may actually see an uptick in transaction volumes if homeowners decide now is the time to sell before prices drop further. All of this means conveyancing caseloads are likely to remain full albeit not at peak levels.

“We also anticipate that they will get increasingly complex as sellers and buyers try to transact in constantly changing economic conditions. Law firms must continue to adopt a technology-first approach to drive efficiencies to manage what is likely to be a difficult next twelve months characterised by large, complex caseloads.

“The case for driving efficiency through digitisation is even more clear in uncertain economic times as the industry faces down a possible recession. The improvements technology can bring by replacing law firm legacy processes could well be essential to keeping the housing market going if we see prolonged recession leading to a period of market decline.”