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09 Thursday Jul 2015

Budget comment from high-end property sector Posted by:

The emergency Budget had a few changes in store for the property sector, most notably changes to the inheritance tax threshold, non-doms and buy-to-let. Bien Media clients discuss what the changes mean.

Adrian Anderson, director of Mayfair-based mortgage broker Anderson Harris, says: ‘There had been fears among landlords that relief on mortgage interest payments for buy-to-let landlords would be completely abolished so while the changes will hit higher-rate taxpayers, it is not as bad as it might have been.

‘It is only fair that there is a more level playing field between first-time buyers and landlords but if this tax break had been completely withdrawn, buy-to-let would have been far less attractive to investors. Thousands of landlords may well have struggled to keep up repayments on their mortgage or struggle to pay the tax, especially when interest rates rise.

‘It is too simplistic to blame landlords snapping up rental properties for the property shortage. People have to live somewhere, and if they can’t afford to buy, then they must rent. With many first-time buyers struggling to get on the property ladder and growing families unable to find the housing they need, housebuilding should be at the centre of the Government’s strategy so we look forward to see what further planning reforms are proposed. Detailed plans are required as to how effective changes will be achieved.’

 

Mark Harris, chief executive of mortgage broker SPF Private Clients, says: ‘Changes to mortgage interest relief for buy-to-let is inevitably going to slow down investment in property because this tax break has been one of its biggest attractions. It puts everyone on a level playing field – basic and higher rate taxpayers, which is fair.

‘It will inevitably slow down geared investment. If you are a genuine cash buyer, it won’t make any difference to you and it probably won’t make any difference to overseas investors in London but if you are looking to leverage with a mortgage, as most people do, it is a kick in the teeth for the higher-rate taxpayer.

‘However, the arguments in favour of buy-to-let remain. If you are looking for good long-term growth then that will still be the case and you have a couple of years to get used to the changes, which makes it less painful.

‘It will mean a shift for house builders who will become more reliant on owner-occupiers than investors so it will keep more of a lid on house prices.

‘The UK remains a pretty reasonable tax jurisdiction in which to live.’

 

Charlie Wells, managing director of buying agency Prime Purchase, says: ‘By far the biggest move in the Budget, as far as the property market is concerned, is the change to the inheritance tax threshold. While it will be welcomed by many, it will take the pressure off people having to downsize, which will only exacerbate the significant shortage in housing stock that we are currently seeing. It is rather shortsighted.

‘With the drastic stamp duty changes at the end of last year are still being absorbed by the upper end of the property market, it is right that the Chancellor has decided to mostly leave property well alone in this emergency Budget. It is a pretty vanilla Budget for property but even so, I still think any recovery in the market will be slow.

‘The market is still unsettled in London and the country, and despite the Conservative election victory, uncertainty remains.

‘Everyone you speak to at every level of agency is saying the same thing: it is tough. There is a huge gulf between sellers’ and buyers’ expectations.’

 

Jonathan Adams, director of prime central London estate agency Napier Watt, says: ‘Buyers from overseas who are choosing London property constantly ask us about the tax implications of their purchase. Any tax changes are always complex and it will take a while to digest the changes that were announced.

‘With the government announcing that from April 2017 new rules will be introduced so that everyone who owns UK residential property cannot avoid inheritance tax by holding it in an offshore company. It is the major driving force behind overseas buyers purchasing in an offshore company and will certainly mean that many will again reassess their UK property ownership. Unlike other taxes, inheritance tax is not means-tested and while the threshold has been moved, it simply will scare off many overseas investors.’

 

Charles Rickards, director of London removals firm Aussie Man & Van, says: ‘In our experience, Sunday is the same as any other day of the week for busy professionals. In the removals trade, working on a Sunday was always a big no-no but in response to customer demand we’ve been offering a Sunday removals service for three years. Over that time we have seen demand grow as customers like the fact that they can move over the weekend and don’t have to take time off work.

‘Sunday is now one of our busiest days with up to 15 vehicles out on the roads. Relaxing Sunday trading hours is likely to give our Sunday business a further boost as more people regard it as just another day of the week to get on with life as normal.

‘The reduction in corporation tax to 18 per cent is excellent news and will make the UK a really competitive place to run a business.’