“Osborne’s Capital Gains Tax increase to 28% remains lower than the rates we had three years ago, of up to 40%, before Labour introduced the 18% rate. This move is not likely to have a negative impact on the UK property market as speculative investors are unlikely to sell off their buy to let property once this new tax rate is introduced at midnight tonight (22/06/10). Professional property investors are generally looking at the long-term benefits and see the importance of the regular income rather than short term capital gains.”
Jo Eccles, Director of Sourcing Property, comments:
“It’s good news that the CGT increase is lower than expected and does not include taper relief as that might have encouraged people to hold on to their property for longer than they would have wanted. Those who own a second home or investment property can therefore function in-line with their lifestyle needs as opposed to working around minimising their tax liabilities.
“The VAT increase could impact those who are planning on major refurbishment works; plans may be brought forward to avoid paying the higher rate to builders, for example. It also impacts on the costs of buying a property, with an increase in surveyor and solicitor fees, but not so much that it will deter buyers.
“Most property investors, both UK and overseas, are taking a long term view of the market, so now that there is more clarity on the Government’s approach to reducing the deficit, we expect to see more confidence in the market place, particularly from overseas buyers who want to put their money into stable economies.”
In response to the Government’s proposed review of the stamp duty tax exemption for first-time buyers Jonathan Moore, director of www.easyroommate.co.uk said:
“Removing the stamp duty break for first-time buyers would be a shame – but it doesn’t make much difference to first-time buyer finances anyway. Getting a mortgage is the key hurdle for first-time buyers to clear. Lenders still expect buyers to stump up huge sums of cash, requiring deposits of 25%. Without backing from the Bank of Mum and Dad, this is impossible for thousands of first-timers. To breathe life into the anemic first-time buyer market, a much cheaper and more effective measure than tax breaks would be for first-timers to be able to incorporate flatmate income when lenders assess how much they can borrow. ‘Flatmate Mortgages’ would offer a real shot in the arm to the first-time buyer market, allowing the average first-timer to access an additional £11,000 for their mortgage.”
On how the property market will be affected Laurence Glynne, Partner of West End estate agency, LDG, said:
“The 28% rise in CGT for higher rate tax payers as opposed to the feared 40-50% is good news for investors and the property market in general. It means that anyone holding back from putting their property on the market may consider their options more favourably, not only due to the lower than expected rate, but because they will be encouraged that investment buyers are unlikely to be deterred by the increase.
“Approximately 30% of our property sales last year were to investors, and we don’t expect a decline in investment purchases following today’s announcement. People have been prepared for the worst for the last few weeks, so this is more of a ‘bruise’ than severe muscular damage.”
Alison Beech of estate agents Spicerhaart said:
“Though it is not as high as expected, the increase in Capital Gains Tax to 28% in today’s emergency budget will have a negative impact on the buy to let market. Potential buy to let landlords could be discouraged from investing, which will impact the market in the long term. The private rental sector remains a vital housing option for potential first time buyers, who continue to struggle to get on the property ladder."
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