Will the budget help you and your property aspirations?
Well, no-one expected properties to be given away or anything too spectacular from the budget in view of the fact that the government’s borrowing is now probably way above anything that a mortgage owner would hold! However some of the changes that are being made will help the property market for the rest of the year, but more for the construction industry than anyone on a personal basis.
Key Announcements: Affect you Personally
StampDutyLand Tax SDLT of residential property sales up to £175,000 is to be extended to 31 December 2009. The SDLT threshold will revert to £125,000 (£150,000 in disadvantaged areas) from 1st January 2010.
Expert View This is good news for potential buyers as it was due to end in September this year. Unfortunately, as mortgage lending has been so restrictive, few people have been able to benefit – especially first time buyers. However this extension gives a bit more time for lending restrictions to ease and hopefully more people will be able to take advantage.
For those that are calling for ‘scrapping’ stamp duty, it’s very unlikely to happen and to be fair, around 60% of people buying now are paying zero stamp duty, and a further 20% just 1%. However, the two groups that could do with more help are first time buyers, who I think should be exempt for properties under £250,000 and this would also help those in London/the Home Counties, who can’t currently benefit from the zero stamp duty increase due to the average house price being higher than £175,000.
VAT Rate Change
The standard rate of VAT will revert from 15% to 17.5% on 1st January 2010.
Although you may not think this affects you buying or selling a home, it does. For buyers who are likely to spend around £8,000 in the first two years of buying, paying less VAT could save you around £200. You will also save money on your conveyancing bill and removal costs.
However if you are first time buyer, you’re big win is to probably look to buy towards the end of the year. Many buyers disappear in December when sellers are at their most desperate, so you typically get better deals. Once you have secured your property, you can then buy everything in the January sales! And by 2010 it should save you an absolute fortune, as companies will be desperate to get rid of excess stock from 2009!
For sellers, your estate agent’s, conveyancing and removal fees will be less too, so if you sell a property for £175,000, you’ll save from £150-200 on your fees.
For 2010-11 the limit is increased to £10,200 (up to £5,100 can be saved in cash).
This is good news for anyone saving for a deposit and hoping to buy in the next year or two, but unfortunately it’s only applicable for the under 50s from next year. It would have been good to have introduced this increased limit now for everyone, especially so for first time buyers as this could help them save for their deposit for the future.
Mortgages The Homeowners Mortgage Support Scheme (HMS) monies have been increased. The Income Support for Mortgage Interest (ISMI) has now been introduced.
Homeowners Mortgage Support Scheme (HMS) This is an emergency scheme to help you if your income may have been lost over time, a partner has lost a job or you’ve a temporary setback in your finances.
The support is from your lender who, if they are part of the scheme, will delay some interest due and/or can help to reduce your payments for up to two years. Don’t get too excited though, you’ll still end up paying it all back later on, with interest.
Read these case studies to help understand if you might be eligible for these schemes. Please Note If you are really struggling to keep up with your mortgage and are likely to lose your home due to long term financial problems, you may be able to benefit from the Mortgage Rescue Scheme.
More money for the Home Buy Direct Scheme An extra £80 million has been allocated to this scheme.
Home Buy Direct is a scheme which helps first time buyers purchase a share of a new build property with an equity loan of up to 30% of the property’s purchase price. The scheme is part funded by developers and rest by the government.
These schemes can make the difference of being able to afford a home of your own or not, so they are definitely worth investigating and Channel 4 have already written about the support that’s available via the Affordable Housing Schemes article.
It’s good that these schemes are available and that more money is being allocated as it will hopefully help sell the huge number of new build properties that are sadly lying empty when there are people out there that would love to live in them. These schemes are just a drop in the ocean, helping tens of thousands of first time buyers when the market is short of hundreds of thousands of them!
This is because this kind of initiative doesn’t solve the key issue at the moment which is the lack of lending at 90-95% levels. Most lenders still require 15-25% deposits to loan money and this is not a level of cash that many first time buyers have. So although additional funds are a good thing, what first time buyers really need is more realistic lending from banks and building societies.
Perhaps, considering ‘we’ and the government own several banks at the moment, it would have been better to have ploughed this money into more affordable mortgages for FTB. For example, in Iceland, you don’t borrow money from a bank to buy a home, you borrow it from the government and pay them back at a fixed interest rate. This type of initiative could have really kick started competitive (but sensible) lending in the UK again!
Changes to Local Housing Allowance (LHA) For those receiving help to pay their rent via LHA, from April 2010 you will not be able to keep any money left over from rental payments.
This seems a sensible idea. Basically, if you are on LHA, the state is paying towards or all of your rent, and if the amount that you are eligible for is more than you need to rent a property, it seems fair that surpluses go back into the ‘pot’ to help other social renters.
Furnished Holiday Lettings Properties owned within the European Economic Area can now qualify for the same tax regime as applied to furnished lets within the UK. From 6th April 2010 the Furnished Holiday Lettings rules are to be scrapped.
Furnished holiday lets are treated, from a tax perspective, very differently to any other form of letting. For example, in certain circumstances you can reduce the amount of Capital Gains Tax you pay versus other second property ownership.
From next year, you can take advantage of these tax breaks both in the UK and Europe, however from 2010 they will all be scrapped.
Our advice? Property tax is incredibly complicated and you need specialist advice from an expert. They can cost £200 per hour, but can save you thousands. If you need help contact www.designsonproperty.co.uk.
House Warming Party Costs to Rise! From Thursday, 23rd April 2009, alcohol duty rates will increase by 2 per cent above the rate of inflation.
Sadly, even if you can afford a home at the moment, whether through buying or renting, you’ll have to pay that little bit more for your booze for your house warming party! However, retailers are desperate for your business so look for buy one get one free offers in your local stores and get everyone to bring a bottle!
Support for the Construction Industry to Boost Supply of Affordable and Green Housing £500 million to help continue housing projects that have stalled and deliver new homes £100 million to build energy efficient housing by local authorities £50m to upgrade military accommodation
We all know that while the buying/selling property market is in the doldrums, developers have been severely affected, with many laying off at least 50% of their workforce in the last 12 months.
However the situation is worse than this. While developers are not building homes to sell in the private sector, they are also not building the required number of affordable homes on developments. Although negotiable, developers are often tasked to build 10-15% affordable homes for the social housing sector on their sites. While building of new properties has dropped from over 200,000 to an estimated 70-80,000 this year, that’s a potential loss of around 20,000 affordable homes this year alone.
As a result, this money will help to generate work on sites and help the construction industry through these tough times, while trying to keep on track with providing affordable, energy efficient homes.