Posts with tag: general election

Why Cutting Stamp Duty Could Lead to an Increase in Prices

Published On: April 28, 2015 at 10:26 am

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Yesterday, Labour announced that they would abolish Stamp Duty for first time buyers on properties costing up to £300,000.

The political party also revealed other proposals to conquer the housing crisis. Read more about their pledges here: /milibands-housing-plans-announced/

The changes to Stamp Duty mean that for the first three years of a Labour government, those buying their first home costing £300,000 or less will not have to pay the tax that buyers pay when they complete a property transaction.

This would not be the first time that these buyers have their Stamp Duty cut. In 2010, Labour chancellor Alistair Darling introduced a two-year tax holiday for first time buyers on homes costing up to £250,000.

Previously, Darling also abolished the tax on properties costing up to £175,000 for 15 months. This applied to all buyers, but first time buyers were most likely to benefit as they buy the cheapest houses.

Chancellor George Osborne reformed Stamp Duty in December 2014 to help buyers. The new tax was split up so that buyers did not pay the same tax rate on the whole purchase price. The cost of the tax reduced for those buying homes less than £937,500.

Why Cutting Stamp Duty Could Lead to an Increase in Prices

Why Cutting Stamp Duty Could Lead to an Increase in Prices

At present, Stamp Duty is only paid on properties costing over £125,000. After that, the tax is tiered. For the next £125,000 buyers pay 2%, on the next £675,000 they pay 5%, on the next £575,000 they pay 10% and on the rest they pay 12%.

On a home costing £150,000, buyers pay £500. On a property costing £299,999 they pay just under £5,000.

Not needing to pay Stamp Duty could leave first time buyers with more money to put towards their home. They could end up moving earlier because they can add more to the deposit.

However, analysis of previous Stamp Duty holidays reveals that on its own, a tax break does little to help the market. Neal Hudson of Savills estate agents looked at the changes of 2012.

He discovered that there was not much evidence of a general rise in activity during the break, however, buyers rushed at the end of the holiday to take advantage of the rule before it was cancelled. His analysis indicates that many buyers brought their purchase forward. In the months following the tax break, sales dropped.

Hudson believes there were 13,000 more sales during the first holiday and 7,000 more during the second.

Labour’s plans support another pledge to build more homes. If supply increases, then pressure on property prices should reduce.

However, it was recently found that a shortage of houses for sale could push prices higher. Read more here: /lack-of-houses-for-sale-could-push-prices-higher/

If more people enter the market, but supply does not grow, then prices are likely to rise.

In December, Capital Economics’ Housing Economist, Matthew Pointon, expected Stamp Duty reforms to increase prices by 3-5%. He said: “Assuming buyers use the same level of deposit to buy a home as before the change, we estimate that with a loan-to-value of 85%, most buyers’ deposits will now allow them to bid for homes that are between 3-12% more expensive than was previously the case. Sellers will respond to that increase in demand by raising their prices.”

Commenting on Labour’s pledge, Pointon says: “The effect will be smaller, as this is a holiday rather than permanent change, and some of the increase in value will drop back once the holiday is over, but in the short term it will act to push up prices.”1

Neal Hudson agrees: “The Labour party’s proposals may be a welcome gesture for those struggling to save a deposit.

“However, the impact of it is reduced given the Stamp Duty reforms already put in place and there is a danger that any savings are just passed on to sellers in a supply-constrained market.”1 

Chief UK Economist at IHS Global Insight, Howard Archer, says that any temporary chance is likely to cause an increase at some stage: “You tend to get a surge in housing market activity just before the period of grace ends, and that can cause a spike in prices.”1

1 http://www.theguardian.com/money/reality-check/2015/apr/27/will-scrapping-stamp-duty-first-time-buyers-push-up-house-prices

Milliband gives his answer to housing problem

Published On: April 27, 2015 at 5:25 pm

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Ed Milliband has outlined his proposals for changes in the rental market, should he be successful in the General Election, just ten days away.

House Key

Milliband’s proposals include ensuring rent increases are frozen at the rate of inflation, giving tenants obligatory three-year contracts and allowing them the right to ascertain knowledge on how much their predecessor had been charged.

The key to number 10 could be in solving the housing crisis, with all of the major parties vocal in their pledges to provide hundreds of thousands of fresh homes. Alongside promising to change common tenancy agreements from one year to three years (with a six-month probationary period) Labour also plan to ban estate agents from charging fees before tenants move into a property.

 

Rip off

This said, Mr Miliband has pledged to do even more to help Britain’s renters from being ripped-off. By capping rents over three year tenancies, wherein rents will not increase by more than inflation, there will be less room for flexibility and thus leave tenants facing less uncertainty. Additionally, by giving tenants a legal right to find out what the previous inhabitant of their property paid, Labour believe that this will give them more power to negotiate fairer rent prices.

 

Landlords would be permitted to serve at least two months’ notice on tenants to leave a property. However, the rent freeze would not apply to those where shorter contracts were necessary, such as in student accommodation.

 

Rogue Landlords

Mr Milliband also outlined plans for landlords to be punished for poor maintenance of a property. Under the proposals, rogue landlords will be refused tax assistance if they are found to have neglected a home. Tax relief currently allows landlords to offset 10% of their gross annual rental yield against fluctuation in values of furniture and necessary appliances.

Milliband feels that this would go some way to helping those priced out of the market and also those in temporary rental agreements.

 

Milliband gives his answer to housing problem

Milliband gives his answer to housing problem

Opposition

Unsurprisingly, Labour’s proposals have been met with disdain by the Tories. Boris Johnson was particularly scathing, responding directly to Milliband by saying, ‘first of all you’d discourage people from getting into the rental market, you’d discourage the creation of new housing, and all that would happen – fewer houses… [and] at the end of the three years those that remained renting out their properties would jack up the rents even higher.’[1]

 

Maligned Liberal Democrat leader Nick Clegg also stated that on the surface, Labour’s plans seemed, ‘superficially attractive,’ but would lead to, ‘huge hikes,’ in rents every three years.[2]

 

Roger Harding of housing charity group Shelter said that limiting rents would be welcome, but Alex Hilton of Generation Rent warned that Labour’s policy would not see rent reduced as rates would, ‘catch up’ in three year spells.[3]

 

Housing is certainly one of the central election battles. The Conservatives have outlined their plans to extend both the Help and Right-to-Buy schemes, while the Lib Dems promised young people living at home a loan to pay for deposits on rented accommodation.

 

Similar to Labour, the Green Party has also pledged to cap rent rates. Leader Natalie Bennett said that, ‘keeping rent rises in line with inflation will reduce poverty and allow tenants a better standard of living.’[4]

 

With the pre-election polls still predicting a photo-finish, it could well be the party who keeps their house in order the best that gets the key to the big property on May 7th.

 

[1-4] http://www.bbc.co.uk/news/election-2015-32468997

Miliband’s Housing Plans Announced

Published On: April 27, 2015 at 4:18 pm

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Ed Miliband will reveal today the housing changes his party propose. These include not charging Stamp Duty for first time buyers on homes up to £300,000, higher taxes for foreign buyers and up to half of new builds being reserved for local residents.

For those buying their first home, £0 Stamp Duty will benefit nine out of ten people and could save £5,000. Labour announced that this plan would cost £225m per year, which will be funded through tax-related measures.

Miliband's Housing Plans Announced

Miliband’s Housing Plans Announced

Miliband will say: “There’s nothing more British than the dream of homeownership, starting out in a place of your own. But for so many young people today that dream is fading with more people than ever renting when they want to buy, new properties being snapped up before local people get a look-in, young families wondering if this country will ever work for them.

“That is the condition of Britain today, a modern housing crisis which only a Labour government will tackle.” 

Labour also plan to change planning laws that will give priority to first time buyers who have lived in an area for over three years for new local homes. The local first policy will also stop properties being advertised overseas before they’ve been showcased in the UK.

Currently, under George Osborne’s reforms, buyers do not pay Stamp Duty on the first £125,000 of their property’s value and then pay 2% on the next £125,000 and 5% on the following £675,000.

Labour hope to fund their Stamp Duty plans by targeting tax-avoiding landlords, which costs around £550m per year. They will introduce a national register of landlords and cut that figure by 20%. This would create a £100m Treasury fund.

Holding companies that purchase properties for investors would also be tackled with an annual tax increase on enveloped dwellings. Buyers from outside the European Union will be hit by a 3% rise to their Stamp Duty.

Miliband will add: “For the first three years of the next Labour government, we will abolish Stamp Duty for all first time buyers of homes under £300,000. We will start construction of one million homes over the next five years, so at least 200,000 homes a year are getting built by the end of the Parliament with a new generation of towns, garden cities and suburbs, unlocking land being hoarded by large developers, telling them either you use the land, or you lose the land.”1

Local authorities will have the power to charge 100% more Council Tax on properties left empty for a year. Miliband hopes to tackle the private rental sector by introducing rent controls.

Shadow Chancellor, Ed Balls, says: “A Labour Treasury after the election will tackle the housing crisis and back young people aspiring to buy their own home.

“Our fully-funded plan will slash Stamp Duty to zero for first time buyers on properties up to £300,000. This will save money that can instead be put towards a deposit and all the other costs that mount up when you buy a home. And we’ll get more affordable homes built too, with the biggest house-building programme in a generation.”1

1 http://www.huffingtonpost.co.uk/2015/04/26/stamp-duty-holiday-promised-by-labour-as-well-as-higher-taxes-on-foreign-buyers_n_7148532.html

Why Student Property Investments will Survive the General Election

Published On: April 27, 2015 at 3:48 pm

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The general election typically causes unrest for property investors who have assets in the UK.

Data from previous election years indicates that many wait until the outcome is announced before buying into the property market. In 2010, there was a 23% rise in house sales in the three months after the result compared to the three previous months.1

It has been claimed that any doubts surrounding investments at this time are unnecessary. However, if you are looking to be completely confident in your investment, student property is the one asset that guarantees security.

Why is student property so safe?

Why Student Property Investments will Survive the General Election

Why Student Property Investments will Survive the General Election

Student accommodation is completely separate from residential and commercial property, meaning that it is not always affected by the economy or housing market. During the economic crisis, student property was the only asset to record growth for every year of the recession.

Market performance

Student property is the UK’s best performing asset class, with £3.3 billion being invested into this sector in the first quarter (Q1) of 2015 alone.1

Furthermore, demand for purpose built student accommodation (PBSA) has never been higher. Despite tuition fees increasing to £9,000 per year in 2012, university enrolment is at record levels, with 659,030 applications at the beginning of this academic year. Over 5m overseas students also study in the UK.1 

International students are known to prefer high-quality PBSA, however, there is a huge undersupply of this type of housing. Most students have to live in the private rental sector, which is not always suitable for them.

Average rents have risen by 3% annually, as students will pay more for PBSA if it is available.1 

Universities will be able to remove the limit to enrolment numbers from September 2015, meaning that demand for this type of property will only increase.

Political policies

When tuition fees increased after the 2010 general election, it was expected that application figures would decline. However, they are at record highs.

This year, three of the main political parties have pledged changes to tuition fees:

  • Labour want to reduce fees to £6,000 per year.
  • The Green Party would get rid of fees completely.
  • UKIP would scrap fees for those studying science, technology, engineering, mathematics and medicine.

Although students could see more changes to their tuition fees, the demand for student accommodation looks set to remain high.

1 http://www.selectproperty.com/2015/04/why-student-property-wont-be-hit-by-the-general-election/

The Abolishment of Letting Agent Fees Could be a Month Away

Published On: April 27, 2015 at 11:31 am

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Categories: Landlord News,Tenant Fees Ban

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If Labour wins the general election next week, they will abolish letting agent fees and introduce longer tenancy agreements and rent caps within a month.

The planned regulations would be announced in the Queen’s Speech on 27th May.

Yesterday, Ed Miliband revealed Labour’s private rental sector policies and today he will uncover the withdrawal of Stamp Duty Land Tax for first time buyers purchasing homes worth up to £300,000.

Mr. Miliband explains that the immediate action is necessary to avoid “massive” rent increases. He would like to help the 4.5m privately renting households who are “struggling to meet the costs of putting a roof over their head” and stop them being “ripped off”.1

The Abolishment of Letting Agent Fees Could be a Month Away

The Abolishment of Letting Agent Fees Could be a Month Away

It is believed that by abolishing letting agent fees charged to tenants, renting households would save £625.

Under a Labour government, three-year tenancies would be common, in which rents could not increase over the CPI measure of inflation, which is 0% at present, however rents could decrease.

Rent caps would not apply to tenants who have agreed short-term tenancies, such as students.

Labour would give tenants the right to find out what the previous tenants paid. Mr. Miliband believes that this will give them more negotiating power.

Even in a three-year tenancy, landlords will still have to give tenants two months’ notice and have “good reason”1 to ask the tenant to leave.

Mr. Miliband has also revealed that landlords who do not adequately maintain their rental properties would lose tax relief, or wear and tear allowance, which allows them to offset 10% of their annual rental income.

He says: “This is a plan for a stable, decent, prosperous private rental market where landlords and tenants can succeed together.”1

Head of Policy at the Royal Institution of Chartered Surveyors (RICS), Jeremy Blackburn, says that rent controls could damage the private rental sector.

However, Director of SpareRoom, Matt Hutchinson, says that the policy will win votes. He believes tenants will “welcome anything that keeps rents down. But with rents having risen faster than sales over recent years, the real damage has been done.”

He adds: “Fixing rents for three years won’t be popular with landlords, but it’ll get a thumbs-up from renters.”1

Mr. Miliband will announce today: “It is simply too expensive for so many young people to buy a home today, saving up for the deposit, paying the fees and having enough left over for the Stamp Duty. So we’re going to act so we can transform the opportunities for young working people in our country.

“For the first three tears of the next Labour government, we will abolish Stamp Duty for all first time buyers of homes under £300,000.”1 

1 http://www.propertyindustryeye.com/legislation-to-outlaw-letting-agent-fees-could-be-just-one-month-away/

The Private Tenant Tackling the Housing Market

Heather Kennedy, a private tenants’ rights campaigner, says that politicians do not listen. She is taking a stand against the system with direct action.

Heather, 31, is a charity worker who moved from Leeds to London in 2011. When she tried to find somewhere to live, she was faced with a problem.

“I’ve been renting all my adult life, since I was 17, but I was struck by how much more difficult it was in London because the imbalance of power between landlords and tenants was so much more stark,” she explains.

Heather and her friends felt that the market was against them, so they started researching their legal rights. They wanted to know what they could do about their situation and help others who were also struggling with housing.

She says: “There were three or four of us and we all had some sort of housing problem at the time. I had a completely hopeless landlord who not only didn’t do any repairs, but didn’t reply to any of our phone calls. We just felt completely powerless.”

Heather was shocked at what she discovered: “Not only have you got a legal system that totally weights in favour of landlords, but you haven’t even got power as a consumer. We realised that our housing rights were so few that actually this was going to have to be about calling for change to the system.”

In 2012, Heather established the private tenants’ rights campaign organisation, Digs. Currently, the group has over 250 members in Hackney, East London, where Heather and her friends live. Other groups fighting for renters’ rights around the UK are Liverpool Generation Rent and Oxford Tenants Union.

“I got really sick of this idea you’d hear from politicians and from the media and charities, that private renting was all for students or comfortable young professionals,” Heather says. “And yet I was seeing people around me having a really difficult time.”

She continues: “Maybe some people are doing it because it’s flexible and it suits their lifestyle, but the things they have to endure as renters are completely unacceptable.

“I started volunteering at a local soup kitchen and realised that about a third of the people there were in private rented [housing]. It really struck me that the imbalance of power is much worse the lower down you get in the market, so if you are living really at the bottom end of the market, that’s where you’ve got the most exploitive conditions, you’ve got landlords that really have absolutely no respect for the wellbeing of their tenants and it’s all happening completely under the radar.”

When Digs began, it used traditional methods to try and influence housing policy. It wrote to local MPs, responded to policy consultations and organised meetings. However, nothing came of it. Activists from the group were excluded from conferences and events.

Heather says there was a moment when she realised that things needed to change. She had just put together a well-documented response to the Communities and Local Government select committee inquiry into private renting, but Digs was not asked to give evidence.

“We thought either they haven’t read it at all, or they have read it and it’s made absolutely no impact on their thinking,” says Heather.

Digs stopped lobbying after this, and decided direct action was a better approach. They were right. Before local elections last year, 60 people from Hackney shared their “galling experiences of renting” with Digs. The activists put together a set of demands from these stories and organised a protest outside the town hall to ask hopeful councillors to discuss the issues.

Heather explains how she felt: “It was like we were calling the shots. They basically had to listen to us. That spelled a shift in the power dynamic between us and the council. Since then, the way they relate to us is completely different. They actively seek our views and demands. We have regular meetings with them rather than having to badger them.”

The council listened when Digs wrote to it last year asking it to boycott the international property fair in Cannes, where councils allegedly sell British cities off to investors.

Heather would like Digs to build a local community, something she says private tenants do not have: “You’re moving around all the time, you’re not necessarily getting support from your community and your neighbours. You haven’t got the same kind of stake in your community.

“It’s very difficult to build connections and solidarity with your neighbours. I think that’s one of the reasons why politicians don’t like estates and prefer people living in the private rented sector, because it is very difficult to collectivise around any problems you’re having.”

Digs is also helping other London housing problems, such as the campaign against mass evictions and tripled rents on the New Era estate in Hoxton, and the group of single mothers, Focus E15, fighting for their homes in Stratford.

Heather says that these battles mark a turning point: “The genie is out of the bottle now. The awareness of groups like Focus E15 and New Era and the broader movement is such that people have an analysis for what’s happening now; it’s no longer just this incredibly unpleasant, very individualised situation.

“Seeing the way that the mums who have been affected have gone from people who were in individual housing crisis to people who are some of the most articulate activists about what is going wrong with housing in our society, is absolutely incredible.”

The growing number of housing campaigners today is well networked and poses a real threat to the system. The political parties’ housing policies in their election manifestos has not suppressed the anger over such issues.

Heather is opposed to the Conservatives’ right to buy policy, which you can read about here: /how-would-the-conservatives-right-to-buy-work/.

She says: “It’s very disappointing that Labour hasn’t unequivocally come out and condemned right to buy, as they should. It’s that kind of lack of courage and populism that is part of the reason why I think we’re going to have a low voter turnout, why I and a lot of other people have lost faith in those traditional routes of influencing policy, and why we are going to see many more occupations, eviction resistance and angry demonstrations.”

Heather also believes that Labour’s pledge of longer tenancies with stable rents will do nothing to tackle the affordability crisis. She says that the political parties are “still completely sold on the idea that the market will solve housing need”, but do not realise the importance of housing tenure.

Heather explains: “What’s absolutely crucial is an expansion not just of social housing, but specifically, of council housing.

“There was a real sense that people had a right to that housing, that it was theirs, which I came across as someone in my 30s and thought, that’s staggering; we’ve been completely robbed of the idea that we have any right to any form of housing.”1

1 http://www.theguardian.com/society/2015/apr/22/heather-kennedy-digs-private-renters-rights-campaign-group