Posts with tag: first time buyers

RICS Demands Overhaul of Housing Taxes to Encourage Downsizing and Help First-Time Buyers

Published On: September 20, 2018 at 9:31 am

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The RICS is calling on an overhaul of housing taxes, including changes to Stamp Duty.

RICS claimed that housing taxes are ‘outdated’ and require reform to assist older people to downsize and younger ones get on the housing ladder.

This morning’s call for action follows the RICS’s usual monthly house price survey, where this time extra questions were asked about taxes and the difficulties young people have in becoming first-time buyers.

Almost half of the estate agency surveyors who responded suggested tax incentives to encourage downsizing.

One suggestion was that people who had moved out of larger homes to buy smaller properties should be exempt from having to pay Stamp Duty.

Another possibility would be scrapping Stamp Duty altogether and adjusting Council Tax rates to make up for lost revenue.

This would take the tax burden away from the transactional phase and on to occupation, freeing up funds in the buying process.

RICS policy manager Abdul Choudhury said the Government should undertake a full-scale review of the Stamp Duty system.

Respondents to the RICS’s latest survey also called for Help to Buy to be extended beyond the current 2021 deadline, but only for first-time buyers.

Bank of Mum and Dad Causes Bust-Ups for Families

Published On: September 14, 2018 at 9:32 am

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The rise of the bank of mum and dad is causing bust-ups between parents and their adult children, who admit that providing financial assistance is not without its risks, according to new research from Key, an independent equity release adviser.

The firm’s nationwide study found that nearly one in five (18%) over-55s have not told all of their children exactly how much their siblings have received, while two out of five (41%) say that they decided how much financial help to give based on how well-off their children were.

Customers of the bank of mum and dad (aka, their children) themselves admit that there are problems. 25% of under-40s say that the financial hand-outs that they’ve received have caused friction with siblings, while three-quarters admit to feeling guilty about the cash that they’ve received.

Industry estimates show that the bank of mum and dad is expected to pay out around £5.8 billion for housing transactions this year alone, with Key’s research showing that the bank of mum and dad is also helping with a range of other financial issues.

Around 10% of homeowners aged 55+ who expect to give money to help younger members of their families will pay for cars, while 8% will put money towards a wedding.

However, Key warns that parents and their children need to be clear from the outset if hand-outs are loans or gifts, and urges both sides to seek independent advice if possible, to avoid the risk of disputes ending in court.

The intergenerational divide 

Bank of Mum and Dad Causes Bust-Ups for Families

Bank of Mum and Dad Causes Bust-Ups for Families

Key’s research found that around two out of three (66%) homeowners aged 55+ believe that their children would be happy for them to give more money to their siblings if they need it. However, 26% say that they are too worried about disputes to discuss money with their children.

The increase in financing by the bank of mum and dad is not driven by children, with 67% of under-40s who are renting agreeing that parents don’t have a duty to provide money. That said, four out of five believe that the intergenerational wealth divide needs to be addressed urgently.

For some parents, and their children, it is not an issue, with 16% of parents admitting that they cannot afford to give any money. 22% of adult children even say that they may have to provide financial support to their own elderly parents.

Will Hale, the CEO of Key, comments: “It is natural for parents to want to help children and grandchildren, but it is desperately sad if that comes with emotional costs on top of the financial costs.

“In an ideal world, the whole family should be involved in discussions about how much money is being paid out and, in general, the research shows most would be perfectly happy for siblings to receive more if they need the help more.”

He continues: “But, of course, we don’t live in an ideal world and, in extreme cases, bank of mum and dad bust-ups can end up in court. We believe advice is key and families should, wherever possible, seek independent help, whether it’s from financial advisers or lawyers. Our experience also indicates that the option of face-to-face advice can be important in getting all parties together to help everyone understand and agree on the approach.”

Advice

When loaning or gifting money to your adult children, you should consider the following:

  • Establish from the beginning whether the money is a gift or a loan. If it is a gift, then there should be fewer problems.
  • If it is a loan, then it’s worth seeking legal advice, particularly if the loan is for buying a property and your child is married or living with a partner.
  • If you’re a homeowner and become a shared owner of your child’s property, then your interest in the property will be regarded as a second home, which means that you will be charged a higher rate of Stamp Duty on the transaction.
  • If the money is a gift, it could incur an Inheritance Tax charge, so specialist financial advice on estate planning could be valuable.
  • It is important to consider updating your will, particularly if you have more than one child and potential beneficiaries.

Help to Buy ‘An Unmitigated Success’

Published On: September 7, 2018 at 8:58 am

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A recent report released by HBF illustrates how successful the Government’s Help to Buy equity loan scheme has been. The report, released as Government considers the scheme’s future, shows how it has achieved all the targets specified at launch to increase home ownership; increase housing supply, and generate economic activity.

The report also demolishes critics’ oft-made claim that the scheme has driven up new build house prices and demonstrates that the respective increase in price between new builds and second-hand homes is remarkably consistent. While new build prices have always traditionally been slightly higher than second-hand properties, that may not come with new appliances and may require remedial work, the rate of house price growth for new build properties continues to mirror price rises in the wider housing market.

Stewart Baseley, Executive Chairman of the Home Builders Federation said; “It is quite clear that the Help to Buy scheme has been an unmitigated success and has delivered handsomely on all its objectives.
It has enabled hundreds of thousands of people to realise their dream of owning a home, the vast majority of whom are first time buyers on average incomes. It has led to an unprecedented increase in house building activity, created tens of thousands of jobs and boosted local economies the length and breadth of the country.

“Government should celebrate its success and use the hard evidence now available to rebut the claims of its critics. As we look to tackle our acute housing crisis and deliver on the Prime Minister’s target to build 300,000 homes per year the scheme has a key part to play. The Government should reflect on the huge impact the scheme is having on individuals keen to realise their dreams of homeownership, on housing supply and on the wider economy

” Housebuilders continue to invest in the land, materials and people needed to deliver furthers increases in supply confident in the demand Help to Buy is underpinning. Certainty moving forward is now required to enable the increases in housing supply, and the associated social and economic benefits, to continue.”

Has Housing Succeeded in Dividing the Younger Generation?

Published On: August 17, 2018 at 9:31 am

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Not only have rising house prices left fewer young people able to buy their own homes, they have succeeded in dividing them into property “haves” and “have nots”.

A minority of young people have only ever made it onto the property ladder, and this number seems to be rapidly decreasing.

Due to this increase in house prices, this pattern has led to concerns surrounding younger generations not being as wealthy as their parents.

However, housing inequality doesn’t just exist between the young and old. This has created a divide between richer and poorer young adults.

Results from the Institute of Fiscal Studies (IFS) calculations, using the Family Resource Survey 1995-96 and 2015-16, revealed that homeownership among the younger generation has dropped across all income groups.

Moreover, the proportion of those aged 25-34 who own a home and have a household income of £41,000 a year after tax has fallen from 85% 20 years ago to 65% currently

This is an equal proportion as that for middle-income earners, who would have a family income of £22,200 to £30,600 after tax 20 years ago.

The decline among this middle-income group has risen, with just 27% now homeowners.

For those earning below £15,080, the proportion dips to just 8%.

As a whole, rising house prices have seen homeownership become gradually the preserve of not just older generations, but also the better-off among the younger generation.

Renters v owners

While it may be that only a minority of young people own their own homes, the inequalities do not end there.

The divide between young homeowners and renters is increasing over time, as those who have succeeded in buying their own homes are benefiting from historically low mortgage interest rates.

This has meant that the proportion of their monthly income spent on housing has been reduced. When they reached their late 20s homeowners born in the early 1980s spent 15% of their income on mortgage interest payments, compared with the 28% spent by renters of the same age.

This is titling the playing field further against those who are unable to buy, in a way that was not true for previous generations.

Stamp Duty Relief Saved First Time Buyers £125m in Q2

Published On: August 2, 2018 at 10:00 am

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The Government’s latest Quarterly Stamp Duty Land Tax Statistics report, for the second quarter (Q2) of the year, shows that the Stamp Duty relief applied to first time buyers in November 2017 saved homeowners a total of £125m when purchasing their first homes.

90% of transactions in Q2 were for residential properties, the study shows. Between Q1 and Q2, these sales increased by 4%, to 247,800 in total, but were 7% lower than in Q2 last year (266,100).

Liable residential transactions

Two-thirds of residential transactions were liable for Stamp Duty in Q2; the lowest proportion since Q1 2014. This reflects recent changes in Stamp Duty rates, the report suggests; liable transactions increased in Q2 2016 due to the new rates of tax on additional properties, but dropped in Q4 2017 due to Stamp Duty relief for first time buyers.

Liable standard rate residential sales rose by 4% to 163,400 on a quarterly basis, as a result of an increase in transactions worth between £250,000-£1m. 45% of residential transactions were valued at less than £250,000, while sales worth between £250,000-£500,000 increased by 9%, to 66,000. Transactions over £500,000 grew by 4%, to 24,100.

Additional dwellings

Stamp Duty Relief Saved First Time Buyers £125m in Q2

Stamp Duty Relief Saved First Time Buyers £125m in Q2

Additional dwellings are residential properties for which Stamp Duty is payable at the standard rate plus 3%. It applies to purchases of second homes and buy-to-let properties. These rates were introduced in April 2016.

Between Q1 and Q2, additional dwellings sales dropped by 2%, to 54,500. For the last four quarters, additional properties have formed around 31% of all liable transactions and have generally increased as a proportion of all residential sales.

63% of additional dwellings transactions in Q2 were under £250,000, marking a decline of 4%, while the amount of sales worth £250,000-£500,000 rose by 4%.

Almost half (46%) of residential Stamp Duty receipts (£896m) were from additional dwellings in Q2, of which £396m are estimated to be from the additional 3% rate.

Stamp Duty relief 

Stamp Duty relief for first time buyers was introduced in November 2017, and applies to purchases of properties for £500,000 or less, provided the buyer has never owned a property and intends to occupy the home as their only or main residence. Under the relief, transactions valued at £300,000 or less are not liable. Sales worth more than £300,000, but less than £500,000, are liable to pay 5% Stamp Duty on the portion over £300,000.

The estimated total amount of first time buyer Stamp Duty relief was £125m in Q2, which is up by 18% on Q1. 52,400 (21%) residential transactions claimed the relief in Q2, marking a 15% rise on a quarterly basis. 78% (40,900) of these sales were non-liable.

Non-liable first time buyer transactions increased by 14%, while liable sales were up by 19%.

Shaun Church, the Director of mortgage broker Private Finance, comments on the figures: “Stamp Duty tax relief saved first time buyers £125m in Q2 – making the regulation a relief for new homeowners in more ways than one.  Stamp Duty has been the final hurdle for first time buyers already struggling with mounting deposit costs for years. With this burden now eased or removed for most, and attractive low-rate mortgage deals for new buyers steadily trickling in, the path to homeownership is becoming clearer.

“Yet Stamp Duty continues to clog up other areas of the market. Transactions have risen quarterly, but are lower than they were this time last year. Thanks to a tunnel vision approach to Stamp Duty relief, where only first time buyers benefit, all other homebuyers – from second steppers to potential downsizers – are being dissuaded from moving due to punitive tax charges. This creates lack of movement further up the chain in an already sluggish market and, ultimately, fewer options for buyers looking to move up and down.”

Brits Prioritising Holidays over Buying Homes

Published On: July 25, 2018 at 8:53 am

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Some of us may be lucky enough to be jetting off somewhere exotic this summer, but did you know that Britons in general are prioritising going on holiday over buying homes?

New research by price comparison website MoneySuperMarket looks at the changing face of homeownership in the UK, focusing on how first time buyers have been affected by developments in the property market.

The number of first time buyers has dropped by 24% since 1994, with the amount of lone first time buyers marking a substantial 45% decrease.

The latest English Housing Survey from the Government assesses variations in housing circumstances – read the report’s findings in full here.

When looking at the changing face of homeownership, MoneySuperMarket found that a large portion of Brits are putting their dreams of buying homes on hold, instead using their savings for shorter-term commitments, such as holidays or travelling (43%).

In fact, just one fifth of Brits would put their savings towards homeownership, with 22% preferring to put money away for a rainy day.

This could be a reflection of the fact that homeownership has become increasingly difficult over the last 20 years, with the average annual salary now accounting for just 11% of the average house price, compared to 23% in 1999.

As a result, the demographic of a homeowner has dramatically changed over the years, with 16-24-year-olds particularly affected, as the number of homeowners within this age range has experienced a huge 68% decline between 1981-2016.

Due to the rise of house prices, larger deposit requirements and higher rental costs, Brits are finding it more difficult to save. For instance, 25-34-year-olds now pay an average of 39% more on rent than those aged 55+ did before purchasing their own homes.

The figures also reveal that there has been a 54% increase in the amount of those renting in the 34-50-year-old bracket from 1996-2016, with 60% of 35-44-year-old tenants citing a preference for renting over homeownership and 41% saying that they aren’t earning enough to be saving for buying a home.

Brits also found themselves compromising on many aspects when looking at buying homes. Most commonly, first time buyers found that they had to compromise on the size of their property (36%), while 29% had to settle for a less preferable location.

Specifically, those in the West Midlands had to make the most compromises when buying their first homes. In fact, more first time buyers in the West Midlands (42%) had to compromise on location than those in London (40%). At the same time, 48% of those in the West Midlands also had to compromise on their budgets – the most of any region in the UK.

Londoners, on the other hand, had a bigger issue with space, with 51% compromising on the size of their homes.

Kevin Pratt, the Consumer Affairs Expert at MoneySuperMarket, comments: “It can be very disheartening for prospective buyers, especially younger ones, to look at the cost of buying a house. What used to be affordable 20 years ago is now proportionally double the investment and, accordingly, we’re seeing a move towards favouring renting and even a lack of interest in saving towards a deposit.”

Indeed, another recent study claims that one third of tenants have no plans to buy their own homes, while 57% of first time buyers have underestimated the cost of buying a home.