This Is Money: Buy-to-let investors vs first-time buyers: The winners or losers from Osborne's property plans...
Sat 28 Nov 2015
Branded the biggest affordable house-building programme since the Seventies, its how David Cameron andGeorge -Osborne hope to solve the countrys housing shortage. But how will the new housing proposals in thisweeks Autumn Statement change the lives of people in Britain? And who will be the winners and losers? Thegood news for this group is in the shape of an extra 2.3billion allocated by the Chancellor to thepreviously-announced Starter Homes Initiative (SHI). This allows first-timers aged under 40 to get a 20 per centdiscount on new build flats and houses to a maximum of 250,000 outside London and 450,000 in the capital.
But the homes wont be available quickly - developers are only expected to identify the first sites from nextspring. However, first-time buyers can get a slice of the action created by a 4billion cash injection to fund135,000 extra shared ownership properties - these are where individuals buy 25 to 75 per cent shares of a homeand pay rent on the rest. These homes are aimed at households earning under 80,000 outside London and up to90,000 in the capital - higher than the previous earning thresholds for shared ownership. Theres bad news foramateur property investors. From April 1, 2016, anyone in England or Wales buying a flat or house to let outmust pay a 3 per cent stamp duty surcharge. This aims to raise up to 880million by 2021 to spend on first-timebuyer homes. For properties worth between 125,000 and 250,000, where stamp duty is now 2 per cent,buy-to-let landlords will pay 5 per cent.
More specifically, todays average buy-to-let flat costs 184,000 - so abuy-to-let landlord must pay an extra 5,520 when buying from April next year. -Ironically, professional investorswith more than 15 buy-to-let properties, are exempted. The idea has gone down like a lead balloon in the rentalsector, already reeling from the removal of some landlord tax breaks by the Chancellor in his July Budget.
Comments from lettings organisations suggest the extra purchase costs will be recouped by higher rents. Thebiggest losers are tenants who will now find it even harder to get the accommodation they want at a price theycan afford.
The extra stamp duty on buy-to-lets will exacerbate an already serious shortage of properties in manyareas, reducing choice and driving up rents, warns Alan Ward, chairman of the Residential LandlordsAssociation. Buy-to-let purchases now make up 15 per cent of all housing deals, so analysts fear this may lead toa market dip next spring when the new duty kicks in. More bad news - these buyers, too, will be hit by a 3 per centstamp duty surcharge if they buy in -England or Wales after April 1. You can snap up that dream cottage in thecountry beforehand, of course, but experts advise buyers to bargain hard if estate agents and sellers exploit thesituation by pushing up prices.
Buyers need to be careful that expected price falls after April dont wipe out theduty savings they make by rushing to buy now, warns Ray Boulger, of mortgage broker John Charcol. Until now,Help To Buy, the Governments loan scheme, has rarely been used in London because prices are so high - atypical home in Greater London costs about 520,000 - but thats about to change from April. Thats when theLondon Help To Buy equity loan scheme kicks in.
It is similar to the existing national initiative, except Londonerscan borrow up to 40 per cent of the homes value instead of 20 per cent. Theres no age limit on applicants, butyou must contribute at least 5 per cent as a deposit and be able to secure a mortgage for up to 55 per cent of thehomes cost. Theres a top price of 600,000 for the home, which must be in a London borough. With rumoursthat interest rates might rise earlier than expected, this will help thousands realise their aspirations of getting onthe ladder, says Peter Rollings, of London estate agency Marsh & Parsons.
Five housing associations are fromthis week permitted to pilot the extension of the Right To Buy scheme, a brainchild of Margaret Thatcher which,until now, applied only to council tenants. Residents of the five associations - L&Q, Riverside, Saffron Housing,Sovereign and Thames Valley, mostly in London, southern and eastern England - can immediately discussbuying their homes with the size of discounts depending on how long they have lived in them. If the pilot workswell, the same principle will be rolled out to housing associations across Britain nextyear.