Inflation

We’ve been eagerly anticipated conservative budget 2018. With some reassuring news for the housing market, first time buyers and the North. Overall The recent budget has confirmed the government’s dedication to the Northern Powerhouse and deliver new property policies designed to benefit both purchasers and investors. See budget 2017 for previous plans.

No Stamp Duty for FTBs

The main headline and those seeming to benefit most from the Chancellor’s Autumn budget looks to be first time buyers again with stamp duty being abolished on shared ownership properties – when someone buys between 25% and 75% of a home and then rents the rest of it.
It will apply to all shared ownership homes worth up to £500,000 and backdated to anyone who has bought one since last year’s Budget.

Help to Buy

The Help to Buy scheme – which was originally due to end in April 2021 – will be extended for two more years.

House Building

Mr Hammond announced the commitment of £500m for the Housing Infrastructure Fund, designed to enable a further 650,000 homes to be built. With new partnerships with housing associations in England to deliver 13,000 homes.

Rents, Finance and Tax

Raising income tax bracket – The personal allowance for income tax will be increased from £11,800 to £12,500 in April – a year earlier than planned.
The higher rate income tax threshold to rise from £46,350 to £50,000 in April. After that, the two rates will rise in line with inflation.

Lettings Relief Changes
Lettings relief limited to properties where the owner is in shared occupancy with the tenant.

Small Building Sites
The government will provide a further guarantee of up to £1bn for smaller house-builders.

Regions

An additional £950m for the Scottish government, £550m for the Welsh government and £320m for a Northern Ireland Executive in the period to 2020-21.
New City and Growth deals for Belfast, north Wales and the Tay Cities area, which includes the cities of Dundee and Perth as well as Angus and the north part of Fife. Pledged £2m for Belfast to help recover from Primark fire.

What are your thoughts on the 2018 budget?

Today was the day of the eagerly anticipated conservative budget 2016. Although not much of note in respect to property but here’s a summary of the business impacts.

Personal Allowance

The Personal Allowance is the amount of income you can earn before you start paying Income Tax. This is currently £10,600 and it will already rise to £11,000 in 2016n. In April 2017 it will now increase further to £11,500.

The point at which you pay the higher rate of Income Tax will increase from £42,385 to £43,000 in 2016 and to £45,000 in April 2017.

From April 2017, small businesses that occupy property with a rateable value of £12,000 or less will pay no business rates.

Currently, this 100% relief is available if you’re a business that occupies a property (e.g. a shop or office) with a value of £6,000 or less.

There will be a tapered rate of relief on properties worth up to £15,000. This means that 600,000 businesses will pay no rates.

Capital Gains Tax

Capital Gains Tax is a tax on the gain you make when you sell something (an ‘asset’) that has gone up in value. It is paid at a basic or higher rate depending on the rate of Income Tax you pay.

From April 2016, the higher rate of Capital Gains Tax will be cut from 28% to 20% and the basic rate from 18% to 10%.

There will be an additional 8% point surcharge to be paid on residential property and carried interest. This is the share of profits or gains that is paid to asset managers.

Capital Gains Tax on residential property does not apply to your main home, only to additional properties (for example a flat that you let out).

Corporation Tax

The main rate of Corporation Tax has already been cut from 28% in 2010 to 20%, the lowest in the G20. It will now be cut again to 17% in 2020, benefitting over 1 million businesses.

Cutting business rates

From April 2017, small businesses that occupy property with a rateable value of £12,000 or less will pay no business rates.

Currently, this 100% relief is available if you’re a business that occupies a property (e.g. a shop or office) with a value of £6,000 or less.

There will be a tapered rate of relief on properties worth up to £15,000. This means that 600,000 businesses will pay no rates.

New stamp duty rates for commercial property

The way stamp duty on freehold commercial property and leasehold premium transactions is calculated will change. Currently, these rates apply to the whole transaction value. From 17 March 2016 the rates will apply to the value of the property over each tax band.

The new rates and tax bands will be 0% for the portion of the transaction value up to £150,000. Remaining tax bands will be 2% between £150,001 and £250,000, and 5% above £250,000.

Buyers of commercial property worth up to £1.05 million will pay less in stamp duty.

Stamp duty rates for leasehold rent transactions will also change. With a new 2% stamp duty rate on leases with a net present value over £5 million.

What are your thoughts?

Today was the first conservative budget since the party was elected and we’ve summarised the key items that affect the property market.

Goerge Osbournse confirmed plans to reduce the benefits cap to £23,000 in London and £20,000 in the rest of the country.

In a familiar theme echoing his earlier Budgets to help people wanting to buy their own homes and pass them on to loved ones when they die.

He announced plans to curb tax breaks for buy-to-let landlords by restricting tax relief to the basic rate of income tax from 2017, aiming to create a more level playing field between those buying a home to let and those buying a home to live in.

There is some good news for homeowners as the tax-free Rent-A-Room limit has been upped from £4,200 to £7,500. The process of taking lodgers can help with mortgage payments and avoid repossession if facing tight financial issues.

High earners to lose the right to cheap council house rents

Subsidised rents for middle class families in council houses were targeted by George Osborne today, in a move saving taxpayers £250million a year.

Some 340,000 people earning over £30,000 a year will lose their right to enjoy cheap rents in housing association or local authority properties.

The subsidised-rent benefit which is worth an average of £3,500 per household will be cut for those earning more than £40,000 a year in London and £30,000 in the rest of England.

As of 2017 onwards, they will be forced to pay a market rent to housing associations and local authorities.

The move will hit nearly one in ten of all social tenants in England, including more than 40,000 who enjoy subsidised rents despite receiving a household income in excess of £50,000 a year.

Under current rules, tenants are protected from paying market rents up to a household income level of £60,000.

Treasury sources said that the money raised from the reform would be ‘put towards reducing the deficit and generate extra income for housing associations to reinvest in affordable housing’.

Mr Osborne said 9 per cent of all social tenants in England are now on higher incomes while enjoying the benefit of an average £3,500-a-year per household in reduced rent.

They include more than 40,000 with annual household incomes in excess of £50,000 and a further 300,000 with incomes over £30,000.

Inheritance tax threshold to rise to £1million for family homes

Families will not have to pay inheritance tax on homes worth up to £1million, under long-promised Conservative reforms.

Honouring a pledge announced eight years ago, George Osborne is to raise the theshold for couples to £1million.

All but the richest will now be able to pass on their homes to their children without a huge tax bill.

The Chancellor will also unveil provisions that many people who downsize will not lose out.

The change, which is expected to come into effect in 2017, will ensure that 94 per cent of families will pay no inheritance tax at all.

Inheritance tax is currently levied at 40 per cent on assets above £325,000 for a single person or £650,000 for a married couple.

This will increase that threshold to £500,000 for singletons and £1million for married couples.

The increased amount however will apply only to the value of the main home, and not to other sources of wealth.

Due to the threshold has stood still as property prices have risen it is affecting record numbers of families.

In March’s budget, Mr Osborne unveiled forecasts showing the number of estates hit was on course to almost double from 35,000 in 2014/15 to 64,000 to 2019/20.

What are your thoughts?

So UK inflation drops to 1.5%, what’s the big deal? Well, this continual 6 month drop below the Bank of England’s 2% target means the general cost of living (food and drink) is going down leaving surplus cash to spend on other things…

With that said prices are still increasing quicker than average earning.

More of an interest to us is the fact that average cost of a UK home rose by almost 10% between April 2013 and April of this year reaching a new record high of £260,000. What’s driving this housing market? Typically this increase is predominantly down South, more specifically London where cash buyers fueling property market driving up the national average. If you were to look at the specific areas of the country there is evidence of decline in house prices, but if you were to look at London alone house prices have increased significantly more than 10% over the past year…

This current level of inflation will only encourage the bank of England to leave interests rates at the all time low.

We’d be interested in knowing your thoughts below?

Lower food prices helped UK inflation fall back to the Bank of England’s target rate of 2% for the first time since November 2009.

The CPI measure eased by 0.1% month-on-month, according to the Office for National Statistics (ONS), with lower meat and fruit costs the biggest contributor.

The ONS said that the collection of the data happened too early in the month to capture reported discounting by retailers in the days before Christmas.

However, there was likely to be a greater contribution to inflation from rising energy bills in the months ahead after only a minimal impact in December.

Typical contributers to inflation
1. Rises in fuel costs.
2. Housing costs
3. Food costs

The continual increases in inflation month on month since 2009 has effectively eroding the spending power of households who have seen wage growth either largely remaining stagnant or rise at a substantially lower rate.

If unemployment rate falls below 7% and the inflation rate remains at or below 2%, it’s likely the BOE will increase interest rates. This wouldn’t be the best news for landlords and homeowners on standard variable rate or tracker mortgages, but would be welcomed by savers who would gain a better return on deposits.

Here’s a summary of the parts of George Osborne’s Autumn Statement 2013 which affect the property market directly or otherwise.

Benefits and state pensions

• Job seekers aged 18 to 21 with no basic numeracy or literacy skills will be required to undertake training in these skills or lose benefits.
• An overall cap on welfare spending will be introduced, but won’t include the state pension or jobseeker’s benefits.

Cost of living

• Average rail fares to stay flat in real terms, instead of rising by 1% above inflation as previously planned.
• Next year’s 2p fuel duty rise cancelled.

Younger Generation

• A 30,000 increase in university places next year which will be paid for by privatising student debt.
• Cap on university student places to be abolished.

Business

• Government to cap inflation on business rates at 2% from next April.
• £1,000 cut from business rates for small shops, pubs and cafes.
• Tax on shale gas firms to be halved.

Families

• School meals to be free for infant school children in first three years.
• Marriage and civil partnership tax break to be introduced from April 2015.

State Pensions

• People now in their 40s will not get the state pension until they are 68, while those in their 30s will have to wait another year until they are 69 and those in their 20s will have to work until they are 70.
• State pension to rise by £2.95 a week in April 2014.

Debt and the economy

• UK growing faster than any other major economy according to the chancellor.
• Recession was deeper than feared – down by 7.2% from peak to trough rather than 6.3% previously thought.
• Growth forecasts from the Office for Budget Responsibility (OBR) increased from 0.6% in 2013, to 1.4%. 2014 forecasts up from 1.8% to 2.4%.
• Unemployment is forecast by OBR to fall from 7.6% to 7% by 2015 and 5.6% by 2017.
• UK government debt will start to fall a year earlier than anticipated and Treasury is on course to run a small budget surplus by 2018/19, says OBR.

Housing

• £1 billion loans to “unblock” housebuilding in areas such as Leeds and Manchester.
• Capital Gains Tax to be levied on foreigners investing in British property from April 2015.

The UK consumer prices index has fallen to 2.2 per cent per cent in September, according to the Office for National Statistics.

The consumer prices index has fallen by 0.3 per cent from 2.5 per cent in August, while the retail prices index has also fallen to 2.6 per cent in September, a fall of 0.3 per cent from 2.9 per cent in August.

CPI is now at its lowest level since November 2009.

Inflation falls markedly since its high in September 2011, but still remains above the Bank of England’s 2 per cent target. CPI reached a record high of 5.2 per cent in September 2011 while RPI stood at 5.8 per cent in September 2011, its highest point since June 1991.

The largest downward pressures on the rate of CPI rate came from furniture, household equipment & maintenance, housing & household services and clothing & footwear. These were partially offset by an upward pressure from transport.

The largest downward pressures on RPI came from household goods, clothing & footwear and food. The only significant upward pressure came from fares & other travel costs.

The annual UK inflation falls sharply as measured by the Consumer Prices Index fell to 2.4% in June, from 2.8% in May, according to the Office for National Statistics.

Lower food, fuel and clothing prices are considered the main contributors to the price falls.

The Retail Prices Index, which includes housing costs, was also down from 3.1% to to 2.8%.

CPI has now fallen for three consecutive months.

What are your thoughts to this reduction?

The UK Consumer Prices Index measure of uk inflation fell to 3% in April – its lowest since February 2010 owing to a slowdown in transport price rises and the timing of Easter, the Office for National Statistics reported.

The Retail Prices Index measure of inflation which includes mortgage repayments fell to 3.5% from 3.6% in March.

Sir Mervyn King, governor of the Bank of England, said CPI inflation would remain abouve the 2% target for the next year of so owing to a “storm” in the eurozone creating a threat to UK recovery.

This is the first time in this Parliament that Sir Mervyn has not had to write an open letter to Chancellor of the Exchequer, George Osborne to explain why the 2% target was missed.

Inflation fell sharply in January as the impact of last year’s VAT rise was no longer shown in the figures.

The Consumer Prices Index (CPI) measure of inflation fell to 3.6% in January, down from 4.2% in December, according to the Office for National Statistics.

Retail Prices Index (RPI) inflation – including mortgage interest payments – fell to 3.9% from 4.8%.

VAT went up from 17.5% to 20% in January 2011, pushing up the annual inflation rates that year as a result.

The drop brings CPI inflation to a 14-month low. However, the rate remains well above the Bank of England’s 2% target.

The government said it expected the uk inflation rate to continue to fall this year.

What do you think?