2018 Budget – How will the property market be affected

By Regency Residential • October 29, 2018 • Buyer's Blog, News

The 2018 Budget will be announced and made public at 3:30pm today. There has been a fair amount of controversy over what the 2018 Budget may mean for First Time Buyers, Overseas Investors and Landlords. In this article we will make our own predictions on what ramifications the 2018 Budget may have on the British property market, based on industry insights and past projects.

Stamp Duty

In a conference in Birmingham discussing the current housing crisis, Theresa May announced that the 2018 Budget will introduce an increase in stamp duty for individuals and companies not paying tax in the UK. Theresa May stated that this is a result of overseas investors and foreign buyers and landlords ‘taking advantage of Britain’s housing market”. Stamp duty for domestic buyers or individuals paying tax will remain relatively high. However, first time buyers will not be required to pay a stamp duty on properties worth less than £300,000.

Overseas Investors

When discussing the 2018 Budget earlier this year, Theresa May stated: “overseas investors will have to pay a new levy” in the form of an increased stamp duty. Neither Theresa May or the Chancellor have announced exactly how much the proposed new stamp duty will be. A key issue that Theresa May discussed revolved around overseas investors exploiting the buoyant British property market to accumulate profit. This has resulted in many properties being left vacant, simply sitting there to make a profit. However, what this statute of the 2018 Budget fails to account for is the positive impact overseas investors have on Britain’s property market.

Many of the projects we lead involve overseas investors and provide a range of different properties to buyers and renters across the UK. Last year we brought over 152 properties to South Manchester. The property was co-developed with domestic and overseas investors and developers. The whole project was a success and provided a sought-after area of Manchester with a range of contemporary competitively priced apartments and larger deluxe townhouses. Increasing the stamp duty tax on every overseas investor could result in a domestic slump in new developments.

First Time Buyers

The 2018 Budget appears to maintain the positive level of support the Government has provided first time buyers over the last year. According to recent research conducted by THISISMONEY.co.uk, first time buyers have saved on average around £2,337 each over the last year. Chancellor Phillip Hammond introduced a tax relief in last year’s Budget and has provided first time buyers with a greater opportunity to get their foot onto the property ladder. However, the ladder is still by no means an obstacle easily overcome. Many first time buyers are still faced with the almost impossible task of saving up for a deposit.

Help to Buy

The Help to Buy scheme is a Government incentive aimed at making buying a property easier for young/first time buyers. The Help to Buy scheme is essentially a loan/ISA provided by the Government as a contribution towards the deposit. Help to Buy ISAs are typically available on new build homes although there may be exceptions to this. The process works like this: if the property is eligible, the Government will lend buyers up to 20% of the total cost of the property. The buyers will only be required to provide 5% of the deposit and can pay the HTB loan off interest free for up to 5 years.

As one of largest and diverse property developers in the UK, MCR Property Group, along with its sales and consultancy arm, Regency Residential, has seen the outstanding benefits the HTB scheme has provided buyers with. Regency Residential and MCR Property Group are currently leading a project in the fashionable Ancoats area of Manchester. The project is aimed at providing young professionals/families with luxury apartments in a vibrant, practical location to Manchester. The Help to Buy scheme will make the prospect of living in contemporary, fully fitted apartments in a central location more realistic and attainable for many first time and younger buyers.

Tax Relief

Despite the rising costs for property in the UK, Government incentives, mainly in the form of tax relief, for investors and landlords has been inconsistent. Changes in the investor/landlord property tax system have unsurprisingly placed concern in the minds of investors and landlords. The current buy to let mortgage tax relief that provided landlords with a significant deduction in their tax bill is changing, the way in which landlords declare their rental home income is set to be completely reformed by 2020 and the 2018 Budget could bring this closer. Landlords only pay tax on the net value of their rental homes, with the current tax relief they do not have to declare any profits made. The 2018 Budget could see this tax relief change and landlords will be required to pay tax on their profits as well as net worth.

Capital Gains Tax

Currently, investors/landlords are required to pay a capital gains tax when they are selling any property. Capital gains tax is the highest taxation on any commercial asset. With current system, basic-rate tax payers are required to pay 18% and higher-rate tax payers are required to pay 28% of the value of the sale of a property. According to The Telegraph, the 2018 Budget could result in landlords/investors having to pay an inflated capital gains tax. The Chancellor and Theresa May have both announced that the 2018 Budget will emphasise support for the NHS, financial advisors are anticipating that the extra funds will be sourced from increasing capital gains tax.

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