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Stamp Duty Change Expected to Spark Homebuying Rush

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Home sales will “jump” at the beginning of next year as people try to buy before the rise in stamp duty, one of the UK’s biggest lenders has predicted.

From March 2025, changes introduced in Wednesday’s Budget mean many will pay the tax when they would not have done previously.

Nationwide said this would affect one fifth of first-time buyers.

However, the impact of these changes is not expected to be as big as previous ones because high interest rates are still putting off buyers.

“Affordability is also still relatively stretched at present as a result of the higher interest rate environment, which is acting to dampen housing market activity more generally,” said chief economist Robert Gardner.

He added that the changes, which only apply to England and Northern Ireland, had been expected, meaning they will likely have less effect than changes in 2020 and 2016.

He predicted that the boost to activity will be followed by a slump over the next six months, based on what happened after previous stamp duty changes.

Nationwide also said the impact would be less in areas where house prices are cheaper, such as Northern Ireland and northern England, and more where homes are pricier, such as London and south-east England.

At the moment, buyers of homes worth less than £250,000 don’t pay stamp duty. This was doubled from £125,000 under Liz Truss’s mini-Budget in September 2022.

The threshold is £425,000 for those buying their first property. This was raised from £300,000 as part of the mini-Budget.

These higher thresholds will end in March 2025, when they will revert to previous levels.

Verona Frankish, chief executive of online estate agent Yopa, said the changes “will certainly light a fire under those buyers currently progressing through the transaction process, or considering a purchase this side of Christmas”.

However, she added that any drop in mortgage rates next year would have a much bigger impact.

Meanwhile, changes to stamp duty for buy-to-let landlords and second-home buyers announced in the Budget came into effect on Thursday, with the additional tax they face rising from 3% to 5%.

Some have predicted this will lead to a drop in landlords buying properties to rent out.

The average price of a UK home hit £265,738 in October, according to the latest Nationwide data.

House prices remain lower than their high in 2022, but they have been slowly rising over the last year as interest rates have fallen and buyers have returned to the market.

Source: BBC

Rachel Reeves Will Not Raise Capital Gains Tax On Second Homes

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Rachel Reeves will not use her budget to increase capital gains tax on the sale of second homes.

The Times reports that capital gains on profits from the sale of shares and some other assets, which is currently levied at 20%, is likely to increase by “several percentage points”. But the rate will not change for second homes.

The chancellor will reportedly leave the rate of capital gains tax on the sale of second homes and buy-to-let properties untouched amid concerns that increasing it would cost money.

When the Conservatives lowered the rate from 28% to 24% at the last budget, the Office for Budget Responsibility said that doing so would actually raise nearly £700 million because of increased property transactions.

Ministers are reportedly concerned that raising tax on the sale of second homes would damage overall revenues.

More than half of all capital gains relates to the sale of shares, while just 12% is from the sale of property.

It is understood that ministers discussed their options and it was concluded that people would deliberately defer selling assets in a bid to avoid being hit by higher rates.

One government source suggested that revenues from increasing capital gains tax would be in the “low billions”.

Reeves is said to be drawing up plans for up to £40bn worth of tax rises and spending cuts to avoid a return to austerity and real-term cuts to government departments. Most of the money will have to come from tax rises.

Stuart Adam, a senior economist at the Institute for Fiscal Studies, told the press: “Simply increasing headline rates of CGT would raise limited revenue and cause economic damage. If the chancellor wants to raise significant sums, it is essential that rate increases are accompanied by changes to the way the tax works — removing some ill-conceived reliefs while giving more generous deductions for investment costs and losses.”

Source: Property Industry Eye

House Prices Growing at Fastest Rate in nearly Two Years

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House prices are now growing at the fastest annual rate in nearly two years, the UK’s largest building society has said, with rises expected to continue.

In the year up to August, houses became 2.4% more valuable with the average property costing £265,375, according to Nationwide.

But prices are still below the all-time highs recorded in the summer of 2022 by about 3%. During that time people were spending lockdown savings as COVID-19 restrictions were unwinding and borrowing rates had not reached the current highs.

The annual increase and associated increase in buying demand is still “subdued by historic standards”, Nationwide said.When the broader economic conditions of high interest rates and house prices costing many multiples of wages are considered, the price increase demonstrates resilience in the sector, the lender added.

What next?

Prices will continue to rise, Nationwide forecast.

“Providing the economy continues to recover steadily, as we expect, housing market activity is likely to strengthen gradually as affordability constraints ease through a combination of modestly lower interest rates and earnings outpacing house price growth,” Nationwide’s chief economist Robert Gardner said.

Tom Bill, head of UK residential research at estate agent Knight Frank, said: “The UK housing market is in a better place than it was last summer as inflation comes under control and lenders trim their rates.

“Financial markets are pricing in another cut this year and as mortgage rates fall this autumn, it should underpin transactions and modest single-digit price growth.”

Iain McKenzie, chief executive of the Guild of Property Professionals, added: “Estate agents across the country are telling us that the market conditions in their areas are improving and there is a strong demand for good-quality housing.”

Source: Sky News

UK Property Market Set for Busy Autumn as Listings Hit 7-Year High

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Britain’s housing market is set for a busy autumn after the Bank of England cut interest rates this month for the first time since Covid-19 struck, with the number of homes listed for sale hitting a seven-year high.

The stock of homes for sale in the UK was 14 per cent higher over the past month compared with the same time in 2023, according to analysis published by property website Zoopla on Wednesday.

More buyers and sellers have been coming back to the market after almost two years of muted activity caused by higher borrowing costs, as the BoE raised its benchmark rate to a 16-year high of 5.25 per cent in a bid to tame inflation.

As interest rates fall — financial markets are pricing in about two more quarter-point cuts by the BoE this year — Zoopla expects the number of home sales to end 2024 roughly 10 per cent higher than 2023. But it warned that the surge of supply meant sellers should not expect high prices.

“With this level of supply, people have got to keep their feet on the ground on price,” said Richard Donnell, executive director at Zoopla. “Especially in the wider south of England, there is affordability pressure that means buyers will use that choice to keep negotiating price.”

The number of sellers cutting their asking prices by 5 per cent or more was at an elevated level of about 20 per cent, and these properties took more than 2.5 times longer to sell than properties that had not been discounted, Zoopla added.

House prices rose 2.7 per cent in the year to June, unchanged from May, according to official figures, leaving the average property at £288,000. The average five-year fixed rate mortgage with a 25 per cent deposit has fallen to 4.55 per cent from 5.55 per cent a year ago, with the cheapest rates now just below 4 per cent, according to Rightmove’s mortgage tracker. However, analysts do not expect a sharp fall in mortgage rates, meaning buyers’ budgets will remain squeezed.

A typical mortgage now costs 39 per cent of the median full-time salary, up from 30 per cent before the Covid-19 pandemic, according to Capital Economics.

Source: Financial Times

Labour Government and the Future of the UK Housing Market

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The recent shift in political power to the Labour government promises significant changes across various sectors, with the UK housing market poised for a substantial transformation.

Labour’s manifesto outlined a series of ambitious plans to address the housing crisis, emphasising affordability, sustainability, and community empowerment. Here’s a closer look at how the housing landscape is expected to evolve under this new administration.

One of Labour’s primary objectives is to tackle the chronic housing shortage that has plagued the UK for decades. The government plans to invest heavily in the construction of new homes, aiming to build at least 300,000 new homes annually. This ambitious target includes a mix of social housing, affordable homes, and homes for first-time buyers. By increasing supply, Labour hopes to ease the pressure on the housing market, making home ownership more attainable for a broader segment of the population.

A cornerstone of Labour’s housing policy is the significant expansion of social housing. The government has committed to building hundreds of thousands of council homes, reversing the trend of declining social housing stock. This move is designed to provide secure, affordable housing options for those on lower incomes and reduce the reliance on the private rental sector, which has often been criticised for high costs and poor conditions.

Labour’s approach to the housing market also includes measures to protect renters. The government intends to introduce rent controls to cap annual rent increases, ensuring that housing costs remain within reach for tenants. Additionally, Labour plans to enhance tenants’ rights, offering greater security of tenure and stronger protections against eviction. These measures aim to create a more balanced rental market, where tenants feel secure and landlords are encouraged to maintain high standards.

Sustainability is a key theme in Labour’s housing strategy. The government is committed to making all new homes environmentally friendly, adhering to stringent energy efficiency standards. This initiative includes retrofitting existing housing stock with modern insulation, heating systems, and renewable energy sources. By focusing on sustainability, Labour aims to reduce the carbon footprint of the housing sector and lower energy bills for homeowners and tenants alike. Ensuring these new builds meet high standards of construction quality, companies like Build Warranty Group can provide the necessary warranties and guarantees, giving homeowners peace of mind and protecting their investments.

First-time buyers are set to benefit from several targeted initiatives under the Labour government. The party has proposed the introduction of a new Help to Buy scheme, offering greater financial support and lower interest rates to those entering the property market for the first time. Additionally, Labour plans to introduce measures to curb speculative buying and investment in residential properties, ensuring that more homes are available for those who intend to live in them. To further support first-time buyers, partnering with organisations like Build Warranty Group can ensure that new homes are protected by comprehensive warranties, providing an additional layer of security for buyers.

Labour’s housing policy also includes a strong focus on community regeneration. The government plans to invest in the revitalisation of neglected urban areas, transforming them into vibrant, livable communities. This includes improving infrastructure, public services, and green spaces, making these areas more attractive places to live and work. By fostering a sense of community, Labour aims to enhance the overall quality of life for residents and stimulate local economies.

To fund these extensive housing initiatives, Labour has outlined a combination of increased public spending and tax reforms. The government plans to raise funds through higher taxes on the wealthiest individuals and large corporations, as well as closing tax loopholes. This approach is expected to generate the necessary revenue to support Labour’s ambitious housing agenda without placing undue financial burden on the majority of taxpayers.

The landscape of the UK housing market is set for a significant transformation under the new Labour government. With a strong focus on increasing housing supply, expanding social housing, protecting renters, promoting sustainability, and supporting first-time buyers, Labour’s policies aim to create a more equitable and sustainable housing market. While the success of these initiatives will depend on effective implementation and ongoing support, the proposed changes offer a hopeful vision for the future of housing in the UK. Companies like Build Warranty Group will play a crucial role in ensuring the quality and durability of new housing developments, contributing to the overall success of Labour’s housing strategy.

Source: PBC Today

What Does a General Election Mean for the UK Housing Market?

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Overall, we don’t see the election having as big an impact on the housing market as previous years. This is due to there not being a huge divide in policy between the two main parties, with neither having many specifics on housing other than a focus on reforming the private rental sector and boosting housing supply. However, the number of completed sales may now fall slightly short of the 1.1m we expected for 2024.

Businesses and landlords will want to see that political parties have concrete plans – namely for boosting housing supply across all tenures and getting the right reforms to the private rented sector. This will ensure that supply is maintained while giving renters more protections.

As we run up to summer and the slower period in the housing market, the election announcement is likely to stall the pace at which new sales are being agreed to in the coming weeks.

Most buyers who are close to completing on a house will ideally want to push through and agree a sale now. Those who are earlier in the process may look to delay decisions until the autumn after the election is over.

The housing market has been recovering with more homes coming to the market for sale, and an increased volume of sales overall. This is a sign of growing confidence amongst sellers, even though mortgage rates remain at 4.5% to 5%.

Currently, there are 392,000 homes in the sales pipeline that all working their way to completion over 2024. This is 3% higher than this time last year, and we don’t expect to see buyers already in the process of working toward sales to pull out.

The incentive to move remains for many households – in particular for first-time buyers who are escaping rapid growth in rent costs, and upsizers who delayed moving last year when mortgage rates increased.

Source: Zoopla

Interest Rates Held at 5.25%

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Andrew Bailey, the Governor of the Bank of England, has signalled that interest rates will likely need to be cut in the coming quarters to maintain inflation at the 2% target. Despite policymakers voting to keep interest rates steady at 5.25%, Bailey emphasized the need for rate cuts, possibly exceeding current market expectations.

Money markets had anticipated two rate cuts by the year’s end before Bailey’s remarks. He stated that a rate reduction in June was not definitively ruled out nor guaranteed.

Bailey expressed optimism regarding falling inflation in the upcoming months, attributing it to encouraging economic indicators. He emphasized the necessity of observing sustained low inflation before implementing rate cuts.

Sir Dave Ramsden, the Bank’s deputy governor, supported calls for reducing borrowing costs, citing signs of inflation’s descent.

The Bank’s recent economic assessment revealed a 0.4% growth in the UK economy during the first quarter, marking a recovery from recession. It projected inflation to have eased back to the 2% target in April from 3.2% in March, with food prices stabilizing around this level for the remainder of the year.

Investors have adjusted their expectations, bringing forward predictions for rate cuts from August to June, with rates potentially dropping to 4.75% by year-end.

Source : Property Notify

Housing Market Continues Spring Revival

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The average asking price of property coming to the market increased by 1.1%, or £4,207, this month to hit £372,324, just £570 short of the record in May 2023, according to new data from Rightmove.

A key factor behind this growth towards a near-record average price is the largest homes, top-of-the-ladder sector, which is seeing its strongest start to the year for price growth since 2014, with the annual rate of price growth is now stood at 1.7%, the highest level for 12 months.

However, the market remains price-sensitive, and operating at different speeds, with prices and activity rising more slowly in the more mortgage dependent first-time buyer and second-stepper sectors.

The number of new sellers coming to the market is up by 12% compared to this time a year ago, and the number of sales being agreed is up by 13% as both seller and buyer activity rebound from last year’s much more subdued Spring.

The biggest growth in activity is taking place in the largest homes, top-of-the-ladder sector, with the number of new sellers up by 18% compared with last year, and the number of sales being agreed up by 20%.

Rightmove says homeowners are springing into action, with Thursday 28 March seeing the highest number of new sellers coming to the market in one day so far in 2024, and the third largest since August 2020.

There appears to be a window of opportunity for those considering a move to act, with a busy summer of sporting events, followed by a likely general election, creating more home-mover distractions than usual, according to Rightmove’s Tim Bannister.

Source : Property Industry Eye

Will the Property Market be Impacted by the Spring Budget?

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The most significant help for the property market is likely to come from a drop in the rate of inflation, which Chancellor Jeremy Hunt stated is expected to fall to its target of 2%, if not lower, within a matter of months.

Spiralling inflation and a seemingly constant increase in the Bank of England base rate between December 2021 and August 2023 saw mortgage rates rise significantly for many. However, if inflation does drop as predicted, the base rate should also reduce, enabling lenders to bring their rates down again.

Several tax changes were announced including:

Multiple dwellings relief – where investors can claim Stamp Duty relief when they buy more than one dwelling in a transaction (or a number of linked transactions) – is going to be scrapped from 6th April 2025.0

Furnished holiday lets tax relief will also be scrapped from 6th April 2025. This relief enables landlords who rent out furnished holiday lets to take the full cost of any mortgage interest payments from rental income and, if they qualify for Business Asset Disposal Relief, they only pay 10% Capital Gains Tax (CGT) when selling.

Higher-rate CGT will drop from 28% to 24%. While lower-rate tax payers are charged CGT at 18% of the rise in the property’s value, higher-rate tax payers pay 28%. The reduction to 24% will be implemented from 6th April 2024.

As mentioned, the biggest help comes from the forecasted fall in inflation to 2% or below, which should ultimately reduce mortgage costs for borrowers.

And whilst the changes to holiday lets will impact the bottom line of some landlords, we believe that some may return to offering longer term tenancies instead – which is good news for families and communities.

Source: Property Notify

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