This month Phillip Hammond has unveiled the Government’s Autumn Budget for our country, in what is being considered a bold pitch to millennials.
From axing stamp duty to council tax premiums and Help to Buy, here are the key points that first-time buyers, homeowners and landlords should be aware of.
If you are saving for your first Home
Hammond declared that the “Number of young people owning their own home has dropped from 59% to 38%”, before setting out his ambitious plan to tackle the housing crisis:
Stamp duty cut for the first-time buyers
The room erupted with applause as Hammond announced that for all first-time purchases up to £300,000, he will axe stamp duty completely. And it was great news for London first time buyers too, as those buying a property worth up to £500,000 will not have to pay stamp duty on the first £300,000, saving themselves £5,000.
Will this work?
We believe that the announcement to abolish stamp duty tax on properties up to £300,000 will certainly give first time buyers a helping hand, but this alone will not fix the main problem which is a lack of housing and affordable housing.
Unfortunately, it is not stamp duty alone that is preventing hopeful buyers from getting on the property ladder – it’s finding a property that’s actually affordable. If there’s no affordable property on the market, people will still not be able to buy.
Hopefully Hammond will deliver on his promise that by the mid-2020s there will be 300,000 homes being built every year – as ultimately, to get first-time buyers on the ladder, the government needs to increase the volume of property on the market, which will in turn help those on the first, second and third rungs of the ladder move up, downsize or sell.
How will this affect the property prices?
If we increase the property supply to levels beyond demand, in the short-term, prices will soften or even come down slightly. In the long term, a higher supply of available property will mean a steady and affordable rate of price growth that will enable the next generation to become homeowners.
Does Britain already have enough land to solve the Housing Crisis?
Hammond was in agreement that we need to build more homes in order to get to grips with our national housing crisis, announcing a series of new homebuilding measures:
- £44 billion of capital funding to help build 300,000 homes annually by mid-2020s
- Homes will be built in high-demand areas and around transport hubs
Interestingly, Hammond announced that it’s not just money that’s needed to fix the housing crisis, but reform. Stating that there’s often a “gap” between planning permission and new homes being built, he announced that Oliver Letwin will be chairing a review to look up ways to speed up planning permission. Shockingly, there are currently 270,000 unused planning permissions in London alone.
Hammond finished by saying that if necessary, the government will take powers to intervene to ensure land is used for housing.
Help to Buy Scheme to receive extra 10 Billion Pounds
As Teresa May promised, the government will find an extra £10 billion for the Help to Buy scheme, which is great news for savers, enabling another 135,000 people to get on the property ladder.
The additional funding will help buyers get a mortgage with a deposit of as little as 5% to buy new build homes.
If you are an investor
100% Council Tax Premium On Vacant Properties
The Chancellor did announce that councils will now be allowed to impose a 100% council tax premium on vacant properties, to discourage landlords and property investors from allowing homes to sit empty. This will double the current fee, which is capped at 50%.
He stated that it “cannot be right” to allow houses to sit empty while many struggle to find somewhere to live.
What will it mean for you?
We are sure you will agree that the landlords across the country are already feeling under pressure from multiple changes in the private rental sector, so it’s important not to rack up any more costs. The new 100% council tax premium will mean it’s even more important for landlords to reduce voids and make sure their rental properties are continuously occupied.
If you are renting
The government recently announced bans on letting agency fees and caps on rent deposits, and now a further step to improve the private rental sector has been announced: tax incentives for landlords who guarantee tenancies of at least 12 months or longer.
For years London’s world-renowned transport system of trains, tubes, busses, and Cycle Superhighways has provided Londoners with fast and efficient ways of getting around the capital.
While major developments such as Crossrail are well-known, relatively smaller improvements and changes can often go unnoticed.
Areas that could soon benefit from improved transport links include South East London. TFL is currently running a consultation the proposed Cycle Superhighway 4, which would run between Tower Bridge and Greenwich, via Canada Water.
Across to the other side of the capital, Sutton and Wimbledon will also see improved transport links and access into and around central London. TFL has recently committed £70m to extend Tramlink’s network through Morden to Sutton. With the twenty-four hour Northern Line service terminating at Morden, there is now an increasing amount of accessible and affordable housing available to young professionals.
All of these developments and improvements mean further good news for prospective buyers, including young families and professionals alike, as transport times fall. This opens up more of outer London as suitable areas to live for those who commute into the capital.
It is clear that buyers should consider upcoming infrastructure plans in any area that they are thinking of purchasing. With London property prices under close scrutiny purchasers should be looking beyond market trends for value added characteristics and areas benefiting from investment in infrastructure.
Existing links and planned developments will have an impact on buyers immediately, for things like commutes and school runs, as well as in the future. Forthcoming improvements will help boost the price of your property in the long run, and help not only first-time buyers but also other individuals looking to transact and climb up the property ladder.
While it looks like 2017 may deliver flat to declined property prices for London, many are optimistic that in 2018 property prices will start to increase again. Challenges include too many high valued new builds coming to the market and relatively low housing stock, but on the other side many buyers seem to have accepted the increased stamp duty changes and now factor that into asking prices.
Overall, we believe that affordability is set to be one of the biggest issues facing buyers in the capital. The Bank of England has also made it quite clear that the interest rates will rise in the very near future.
It looks that buyers have adapted to the increase in stamp duty at the upper levels introduced in 2014 but domestic and global economic ambiguity is having an effect on sales levels. It is very clear that the number of motivated sellers in the market is limited and very few are looking to sell urgently.
But London still remains a magnet for international buyers, there has been nervousness in some quarters from those concerned about the outcome of the ongoing Brexit negotiations and the overall health of the London housing market. In general, however, the new build and off plan markets remain attractive to international buyers, especially those looking for second homes that offer state of the art modern amenities and those seeking buy to let investments. New build homes offer gross rental yields in the region of 4% to 5%, higher than the 2% to 3% commanded by secondary stock.
We expect house prices in prime central London to continue to soften. Assuming that the Brexit negotiations take on a clearer and firmer structure at the end of the two year negotiations, relieving uncertainty driven anxiety, we expect house prices in prime central London to strengthen by the end of 2018. And over the next five year period between 2017 and 2021 we expect prices to be on the up.
It may be an age-old question – property or pension – but bricks and mortar is increasingly the option of choice for retirement.
Current trends seem to indicate that growing numbers of people are favouring property as a means of providing themselves with a retirement income. Right now, you can hardly blame them for turning to bricks-and-mortar instead of banking on a pensions pot, where returns depend upon the uncertainty of the stock market performance of investments.
Most people, on retirement, buy an annuity with their pension savings in order to provide them with an income. However, because of low yields on gilts and increasing longevity, that is an option that can represent poor value.
Critics will argue that house prices rose only by 2.9 per cent this year to July and some predict that prices will not rise at all over 2017 as a whole. However, when you see that house prices have increased in the south-east England by 37 per cent during the last ten years (with London price rises averaging 70 per cent), you can certainly appreciate the enduring appeal of property.
The rise of the buy-to-let market has been nothing short of phenomenal over the same period, giving property owners the added bonus of making significant returns from rental yields.
We are certain that neither the changes in Stamp Duty Tax, nor Brexit, nor even the General Election will bring an end to the Buy-to-Let market. While London remains London people will always want to live here and there will always be demand for rented accommodation.
Who can say what will happen in the future?
Pensions are still generally regarded as a “safe bet” because, by and large, there’s usually very little chance of ending up with less than originally invested.
For the moment, even though prices aren’t rising everywhere, investing in property would appear to be a very appealing option. But be sure to do your research, being a landlord is not everyone’s cup of tea and requires some sector knowledge, well, unless you have a good managing agent to save all the hassle for you, of course.
Being a landlord is not an easy game, especially with the ever-changing legislation and regulations. We have come up with a list of the most important safety regulations that you must comply with before you can let your property:
Gas Safety Certificate
Any gas central heating system or appliance will need to be certified as safe to use under The Gas Safety Regulations 1998. Inspections must be done prior to a tenant moving in and annually thereafter. If you are using a Lettings Agent to let your property, they usually would be able to help you arrange a gas safety inspection to be carried out by a Gas Safe registered engineer who will issue a Gas Safety Certificate. It is also a legal requirement that a copy of the certificate is given to the tenant within 30 days.
Any property built after 1992 should be fitted with mains operated smoke detectors and alarms on each floor as required under building regulations. It is now also a legal requirement to install a smoke alarm on every floor of a rental property. These must be tested as in good working order at the start of every tenancy and you must keep a written record of what type of smoke alarms were present, their location and if they were working at the start of the tenancy. We recommend producing a simple tick list for you to complete and sign in front of the tenant.
Carbon Monoxide Alarms
Carbon monoxide (CO) is a colourless, odourless and tasteless poisonous gas. Best practice is to install a carbon monoxide alarm but these must be installed in any room with a solid fuel installation e.g. a wood burning stove. They should also be tested to ensure they are in good working order at the start of every tenancy – and just like with the smoke alarms, a record of the type of the alarm, location and working order should be recorded and kept on file for the duration of the tenancy.
The Electrical Equipment (Safety) Regulations 1994 state that anything electrical within the property, or anything that you supply as part of the fixtures and fittings, should be up to current electrical safety standards and safe to use. Landlords must also make sure that the electrical system is safe e.g. sockets and light fittings. If you let your property as a HMO (three or more tenants who form two or more households) then you must also carry out safety checks on electrical installations every five years by a NICEIC accredited electrician. Your Lettings Agent should be able to help you can arrange for a qualified and vetted contractor to carry out a Portable Appliance Test (PAT) to ensure all appliances with plugs are safe to use.
Furniture and Furnishings
Furniture manufactured today must have a safety label stating it meets the Furniture and Furnishings (Fire) (Safety) Regulations 1988. It is a good idea to check that sofas, beds, bedheads, cushions, pillows and furniture covers still have the relevant fire safety tag attached. Furniture manufactured prior to 1950 is exempt but it is best practice to remove vintage, antique or sentimental items from a property.
Legionnaires and Safety Checks
Under the Control of Substances Hazardous to Health Regulations 1989 landlords who provide residential accommodation have a legal duty to consider, assess and control the risks of exposure to Legionella to their tenants. All water systems require an assessment of the risk and landlords can carry out this assessment themselves if they are competent, or employ somebody who is. In most residential settings a simple assessment may show that the risks are low and no further action may be necessary. For more information visit www.hse.gov.uk/legionnaires/faqs.htm#Landlord.
European Standards for Safety of Internal Window Blinds affect any device used for internal blinds or curtain tracks. They apply to blinds which have cords or chains fitted with a hazardous loop that could create a hazard in premises where children aged between 0 and 42 months are likely to have access or be present. You should ensure that all cords and chains at the property are checked and any that could create a hazard are replaced or fitted with a snap connector.
If you are unsure about your safety obligations as a landlord or have any questions then please consult your Letting Agent, here at Austin Homes we are always happy to help!