Chancellor George Osborne today showcased the UK Budget for 2014. The main question is how will it impact the UK property market and effect you, the investor. Points of interest are Stamp Duty, Help to Buy, new housing, savings and taxes.
Nothing much changes for the average private homeowner, or small time landlord. The big announcement and change comes to close a loophole that many foreign investors used to avoid stamp duty by buying their properties through company ownership. Now there is a 15% stamp duty on purchases over £500,000. This will severely target foreign owned properties in particular in London and South East.
THOUGHTS – Will foreign investors now just flood the UK commercial property market? So is it a good time to get in now and sell in the near future?
Help to Buy
The equity loan scheme known as Help to Buy has been extended on new homes until 2020, with the aim to fill the shortfall in housing and encourage lending from banks and building societies.
In reality this will mean that the construction industry will be boosted until 2020 at the expense of young buyers, who end up buying an inflated prices, and find themselves in a lot of debt. This will keep pressures on house prices up until 2020 too. For the investor it means, get on the property ladder today or expand your portfolio, and if you want an exit do it before 2020. It also means new builds that are eligible for the scheme will be considerably higher priced than old builds, however this will drag the prices of old builds along too.
No mention of any extension to Help to Buy 2, the scheme that was available for non new builds up to £600k.
Ebbsfleet Garden City – 15,000 new homes to be built near the Ebbsfleet international rail terminal, to create a commuting hub. As PropVestment advised a few years ago Ebbsfleet was an investment hot spot and it will only increase more now. With great transport links it will become a thriving part of Kent. However we think the area will now be priced in.
Brent Cross and Barking Riverside in London will also receive new developments and improvements to help aid the capitals housing problems.
UPDATE – There will be 11,000 new homes in Barking Riverside and up to 10,000 in Brent Cross. The regeneration of the infamous Grahame Park estate near Brent Cross will also be brought forward.
Right to build – New scheme to help people build their own homes. £1.5m allocated, that is pittance really, how many can be supported through this? Although it does sound like an interesting concept.
The chancellor’s target is 200,000 new homes to be built, however many critic suggest that this is still not enough and the housing supply deficit will keep growing. This means by simple economics demand will continue to out strip supply and prices will keep on rising.
Savings & Taxes
A few points are that the zero rate and 40p rate thresholds will rise, increasing affordability. ISA thresholds are increased to £15,000 per person and there are a few other measures to encourage savings. This could have impacts either way, one way is that it will encourage savings so people will be able to build up deposits for buying a property. On the counter if they have saved into ISAs that they do not want to break, it could mean that people will be more reluctant to invest into property. It will depend on person to person.
How will #Budget2014 impact the PropVestor?
For the traditional investor it is a fairly positive budget and it will help discourage corporates and foreign investors with the Stamp duty ruling. This will leave more opportunities for private UK based investors.
Help to Buy is contentious but it will keep pressures on house prices until the end of the decade.
PropVestment’s top tip
Get on the property ladder today, do not wait until tomorrow