Fri, 25 Jun 10
While many of the austere measures announced in Chancellor George Osborne’s first Budget were expected the document also contained one major surprise.
It had been widely expected that capital gains tax (CGT) would rise to as much as 50%. However, Osborne revealed that it would rise to just 28% for higher and additional rate taxpayers. This rise took affect from this week. For basic rate taxpayers the rate will remain the same, at 18%.
Among those to breathe a sigh of relief were Prime Purchase’s head of country Jonathan Bramwell.
He said: “Property owners who expected CGT to rise to 40% or 50% and who rushed through sales of second homes may now regret that decision. We are now unlikely to see a glut of second homes coming to the market.”
Kevin Wilkes, managing director of the Worldwide Property Group, added: “The fear of such dramatic increases has proved unfounded. I welcome the move to leave CGT unchanged for those people in lower tax brackets, which will result in many being untouched by this rise.”
But David Salusbury, chairman of the National Landlords Association, is more downbeat, predicting that the increase will affect the majority of buy-to-let landlords “who supplement a modest income with their lettings activity.”
Property experts fear that a raft of other measures announced by Osborne will also affect people’s ability to secure a home or mortgage. From next January VAT will rise from 17.5% to 20%. He also revealed that public sector pay for those earning more than £21,000 would be frozen for two years.
The Council of Mortgage Lenders (CML) believes such measures could seriously harm the property market in the short term.
CML director general Michael Coogan said: “In the short term pain is likely, as the effect of tax rises on household finances dampens the already fragile recovery in house-buyers' confidence, house building is affected, and support for housing costs across all tenures is curtailed.
"In housing terms this may be the age of inspiration but against an austere backdrop there is a long way to go before the supply of housing, or the ability of would-be home-owners to achieve their aspiration, are likely to show any significant pickup."
Mark Goodwin, Royal Institution of Chartered Surveyors director of external affairs, is more optimistic and is pleased by tax breaks announced by Osborne to encourage firms to take on more staff.
He said: “Despite expected cuts to the public sector, regional property markets may also get some help from labour market initiatives to reduce the start up costs of hiring employees. This may be especially helpful for smaller enterprises.”
Jonathan Moore, director of Easyroommate.co.uk, says that the budget measures are likely to lead to increased demand for rented accommodation.
He said: “House prices have continued their upwards trajectory in 2010, and thousands of buyers cannot afford to get a foot on the housing ladder as a result. With potential public sector job losses on the way in the autumn and the inevitable negative impact the VAT hike will have on businesses, the affordability gap is only set to worsen.”
Also announced by Osborne was a prediction of strong growth for the UK economy during 2011 and 2012. Liam Bailey, head of residential research at estate agents Knight Frank, believes this could mean interest rates remain low.
He said: “The inference is that the Bank of England will be encouraged to maintain a very loose monetary policy for longer than recently expected, suggesting interest rates at current levels could be maintained for longer. This would underpin house prices and also contribute to ongoing low supply in the market."
For Karelia Scott-Daniels, director of Manse & Garret Property Search, one of the biggest disappointments of the Budget was the “deafening silence on stamp duty.”
She said: “The 5% top rate of stamp duty for homes over £1m introduced by former Chancellor Alistair Darling in March and due to come into force next year, hasn’t been brought forward but neither has it been scrapped. Neither has there been any more on making permanent the stamp duty threshold of £250,000 for first time buyers.”
In other property news this week Home.co.uk has revealed its latest list of the best and worst property selling towns, which is measured on the length of time property stays on the market.
London boroughs and areas in the south east of England dominate the top 20, with
Portslade-by-sea in Sussex topping the list. Properties in the area stay on the market for just 78 days on average, compared to a national average of 197 days.
Llandudno in Wales is the worst performing property market, with the average property staying on the market for 390 days. Other areas in the bottom 20 include Hartlepool, Crosby and Salford.
The figures also show a dramatic increase in properties coming onto the market in all areas.
By Joe Lepper
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