Friday, 4 December 2015

What does the 3% rise in Stamp duty mean to you?



Did you even know it was changing?  Remember when VAT dropped to 15% to kick start the economy then rose to 20% to compensate for the reduction  (It had previously been 17.5% for years). 


So what will the new Stamp Duty Land Tax mean to you next April?  Will you be affected?  Will you have to find more money to move? Or will you escape without the hefty price tag?



If you are selling your only property and buying one.  Nothing changes for your purchase, you are good to go.  Your rates stay at the new low figures. (see below) BUT read on, as depending who buys your property and their position may affect your offers?  Not always, not often, not every house, but maybe. 


If you have another property that you own, or are considering a rent to buy scenario you might need to read on, carefully, and proceed with a little more caution.

So what is changing?


In November 2015 the government announced a stamp duty increase the current stepped rates by 3 points for any properties over £40,000 from April 2016.

Here's the latest change (from April 2016)  on purchases of second homes or buy to let properties: (SDLT = Stamp Duty Land Tax)

2nd Home   Current SDLT   SDLT from    Difference
Buy to Let (BTL)        April '16    
Purchase Price            
             
£100,000   £0   £3,000   £3,000
         
£150,000   £500   £5,000   £4,500
         
£200,000   £1,500   £7,500   £6,000
         
£300,000   £5,000   £14,000   £9,000
             



Here's the chart to work it out: as you may not be purchasing at the prices above:


2nd Home     Current SDLT   SDLT from April '16
Buy to Let (BTL)            
Purchase Price       (Stepped)           (Stepped )
(Over £40,00)            
             
Up to 125,000   0
  3%  
             
Above £125,000 and up to £250,000   2   5%  
             
Above £250,000 and up to £925,000   5 %   8%  
             
Above £925,000 and up to £1,500,000   10 %   13%  
             
Above £1,500,000+   12 %   15%  
             

How does the stepped part work?:  Right now a £150,000 property would have to pay 2% on £25k in April (on second homes and BTL) that will change to 3% on the first £125,000 and 5% on the next £25k



Why?


Moss Properties Managing Director Sanjay Gandhi thinks this is to aid the buy to let sector and 'reduce down accidental landlords and smaller landlords to provide longer term lets and less instability in lives around the uk' as the 'overseas markets work very differently and provide long term lets to tenants'.  Claire Harvey MD at Seekers disagrees, 'Landlords will still buy, if they are considering a purchase it is usually at least a 5 year investment to make it worth it, so anything additional in costs becomes negligible'


How does this affect you? (our Lancaster and Morecambe sellers)


Landlords: 

If you are a landlord and considering expanding your portfolio you will have to dig deeper post April. 

Pitfalls for Renters: 


Rents may have to rise to ensure a Buy to Let is a good investment


Pitfalls for owner occupiers wanting to sell: 



Properties sold to landlords MAY see more negotiation in offers or lower offers. 


Note to sellers:  Not every buyer is an investor/second home owner so sellers, this might not be a problem at all for you anyway.


(Just ask your agent each time you have a viewing, so you can be prepared)


Bonus for first time buyers:



If you are a first time buyer the choice will increase as the properties are less likely to be snapped up by buy to let landlords


Landlord Bonus: 



Will things really change for a landlord?  If rents rise, you will still get a similar investment yield anyway that you had before even with an increased upfront cost.  You'll need to do the sums.

My Predictions:


Buy to let landlords with just a few properties may sell them off in the first quarter providing a boost early next year to available properties, bad news for sellers of these properties as there will be more choice, leading to a stabilisation of house prices. 

Ask us how to increase the likelihood of a sale and how to attract the right buyers YOU REALLY WANT!!

If you are a first time buyer you may find a good buy early next year!



Those who can't sell:

For those people who can't sell their home and need to move will need to make more considerations prior to taking the plunge.


The GOOD NEWS:


The government hasn't finalised the parameters yet!  So, you may still be a way to sidestep the cost.  Some reports have said that you could purchase in your long term partners name - I'm sure your solicitor will have something to say about this.  Good news if your not married, I suppose! Watch this space.

For those larger corporates buying properties and already owning more than 15 properties, may receive special dispensation for this, but no one yet knows.


What does this mean to the Uk property market?



In 2014 the government stepped in to assist the growth of the property market by making the SDLT stepped.  Therefore reducing the cost of purchasing a house.  The predictions back then was that it would be a catalyst to aiding growth.  In parts it did, it made the financial strain of a purchase  much easier, especially for first time buyers and investors.  Yes, the market saw an increase this year of purchases and in 2015 there were over £1.4 million transactions.  Much higher than previous years.  It didn't really have the influx of buyers that was predicted, for those who were already purchasing it made a big difference, and even now I still come across people who don't know that it has changed for the better.




The future - at the moment my prediction is that it is unlikely to make much difference to Landlords/investors in Lancaster and Morecambe.  Our buy to let investors prefer the more reasonably priced homes that will only see a small increase in upfront costs anyway.




Before the announcement lots of the industry gurus had predicted an average house price increase of 5% next year - (individual predictions differed from a mediocre 2.5% (Property wire) to 7.30% (Beacon Economic forecasting).  It would be interesting to see exactly what they predict will happen now.




We may see a shortfall in new landlords to market but overall it will see that home owners that do go on to sell their properties will be much happier selling to first time buyers and owner occupiers and gaining the price they really want.




Local investors that are serious will see the bigger picture and their nest eggs will be fine if they are in it for the long haul anyway. 




As for our Lancaster and Morecambe owners that wanted to rent their old homes to buy a new one - may have further considerations to think about, but not until we know the extent of what the government will impose.



As a side note: The government is panning to invest circa £60million of the funds they gain from this into areas where 2nd home ownership is particularly acute, interesting indeed!


A small little bonus for sales only agents:  Less rentals may mean less 'To Let' signs all over the place!  These are almost like junk mail on the outside of houses at the moment and don't help first time buyers feel comfortable buying in high rental turnover uptake areas.



I'd love to know how you think this will affect you?  Are you currently struggling to sell and weighing up your options?  or perhaps trying to build a local property portfolio for your children? 


Why not drop me an email on v.green@v-move.co.uk


Nothing is ever straight forward and sometimes carefully electing the right moving strategy will lessen your monetary burden and help to attain your dream home.


I'd love to hear from you



















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