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Monthly Archives:March 2012

Weekend Breakfast on FiveLive

Starting at 6.00am I spoke to Phil Williams on BBC FiveLive on Weekend Breakfast about the end of the two year Stamp Duty holiday. Then on to BBC Three Counties Radio, BBC Radio Berkshire and then finishing at 8.10 with a chat with BBC Radio Wales. Phew!!

The 2012 Budget

A quick look at the bigger property portals suggests that there are more than 2,000 homes currently for sale with guide prices of more than £2m. In his Budget the Chancellor has decided that buying something at this level is now going to cost you 2% more by way of Stamp Duty Land Tax. What’s more, if you purchase a property ‘bought in a company envelope’ as Osborne puts it you can now expect SDLT to cost you 15%. Personally, I think that clarifying the position on ‘avoidance’ is way overdue and something that was widely expected. This should make it much clearer now for HM Revenue & Customs to collect the Stamp Duty due and although there will be impact on both those buying and those connected with the buying and selling of expensive homes the announcement is broadly neutral. As an example of the over reaction of some in the City Savills shares fell briefly on news of these changes.
The Government plans to discuss  a levy or annual charge on those homes worth more than £2m and wrapped in a company. Expect the consultation to be noisy as this could effect 100,000 homes. This is as close to a Mansion Tax as the coalition Chancellor came but it may establish the principle for future Budgets.
I don’t think that these changes will have a significant impact on values. Don’t expect to see many homes priced at £2.25m for obvious reasons but buyers of homes at the very top of the market don’t tend to worry so much about ‘value’. Just as many people don’t view an expensive watch as a real cost compared to the price of an equally efficient, cheaper Swatch. It’s about the product and what it says about you and for many folk there’s value in that.
No worries for those who have already exchanged contracts on a property worth more than £2m but are yet to complete. They and those who manage to do so before the end of the day should find they squeak through according to HMRC notes just published.
620,962 homes sold in England & Wales in last year. Just 1,588 were for more than £2m and in London 84,728 were sold of which only 1,224 cost over £2m. These figures include those owned or ‘wrapped’ by companies. Those looking to buy a property in the UK, particularly those from outside the country will grumble about the additional 2%/10% cost but compared to leaving their money in north Africa or in the Euro-based economy the cost is well worth paying. What will be interesting is that I expect to see boom in lettings of the most expensive homes. Prepare to see agents opening ‘super-prime’ letting departments in short order.
Moving tax from income to wealth is not something I have seen debated widely so there may well be additional consequences but I don’t expect fewer homes to sell and the bigger news that will effect all of us – rich or poor will come next Tuesday when the hugely important and controversial National Planning Policy Framework is published.
The Chancellor has not announced changes to the rules on Real Estate Investment Trusts but has undertaken to consult on these later in the year. A disappointment and in my view a missed opportunity. The private rented sector still requires a leg up and the national housing crisis remains dire as a result of these short-sighted decisions.

BBC News

A live interview looking ahead to Wednesday’s Budget which we now expect will deal with so called ‘stamp duty avoidance’ was followed by pre-record spots for the BBC 10 o’Clock News and a piece for Channel 4 News.

Here’s the live interview with the lovely Maxine Mawhinney.

Uninsured Violet.

On BBC Breakfast this morning the tragic story of my neighbour Violet Grainger and the fire that destroyed her house a year ago. Trying to save money she had cancelled the £300 a year insurance premium and although it is believed that the fire started next door, because negligence has not been proved the fire is deemed to have been a tragic accident and she is left with nothing but the land her house stood upon.

Violet wanted to warn the 1.8m people who like her have no buildings insurance that it really can be a false economy.

More on the BBC Web site here.

Huge thanks to Paul Lewis, to Bob Howard and to Laura Checkley of Pemberton Greenish

Tax payers to underwrite house prices.

In amongst some excellent and innovative ideas in last years Housing Strategy was something that looked like it had been left in a draw in the Department for Communities and Local Government by it’s founder, the over-promoted John Prescott. Not to be confused with the similar sounding ‘FirstBuy‘ scheme the Dynamic Duo of Messrs Grant Shapps & Eric Pickles had found ‘NewBuy‘, a way of helping initially first time buyers of new build property to find the deposits that lenders have been reluctant to advance. Launched today, the scheme is now open to all buyers of new build property from all developers big or small.

It hasn’t been universally welcomed.

The Council of Mortgage Lenders has said that the scheme is there not to help people with poor credit but those who could afford the (record low) mortgage payments but who don’t have the necessary deposits that their members typically require. I’m guessing but perhaps the reason CML members require these high deposits is because (a) the Government has warned them about high loan-to-value products and (b) because they want a cushion should house prices fall.

In an interview on the Today Program the head of house builder Persimmon confirmed that they had queues of new buyers able to afford the repayments and plenty of sites on which to build. The problem was that buyers didn’t have the deposits that were needed.

Grant Shapps answer is to allow the tax payer to underwrite a higher loan-to-value mortgage staking the last 5.5% (after the buyers 5% and 3.5% from the house builder) to satisfy lenders that they are protected and thereby encourage builders that there will be people who are able to buy their expensive product.

House builders set their prices. It is in their commercial interest to ration new homes to help maintain prices. In other capitalist markets if buyers find that prices have risen too high then said prices have to fall. By intervening the Government is propping up prices and putting off the inevitable adjustment that must come sooner or later.

“Caveat Emptor” would be my advice to anyone thinking of buying a new build today using the NewBuy scheme. Residents of Hartlepool have seen house prices fall by 16%+ over the past year according to the Land Registry.

Let’s be clear, the scheme works so that IF the value of a property purchased under the scheme falls in value the first 5% lost is the buyers deposit. Lenders can the call upon the next 3.5% of any loss from the total pool of monies contributed for all the properties sold by house builders who participate in the scheme and only once these funds has been exhausted would the pax payer be called upon for the next 5.5% of any loss the lender has incurred.

However,  as Ian Cowie in the Telegraph blogs, you can’t buck a capitalist market. I applaud the fact that people are trying to come up with ways to help get more homes built but the commercial risks should be taken by commercial companies involved – in this case the lender and the builder and not be left for the tax payer. We’re still recovering from the last time clever people tried selling clever mortgages and look what a mess that resulted in!

BBC FiveLive Breakfast

Up early on a Sunday morning to talk to Phil & Anna at 6am about the Halifax raising their Standard Variable Rate. Help provided the night before by the lovely Melanie Bien and a crib sheet from the CML all helped make it sound like I knew what I was talking about. Did I pull it off? What do you think.