As agents and commentators digest the implications of yesterday’s Budget, here is our at-a-glance guide to the key issues it raises.
What has been the reaction of British estate agents to Chancellor George Osborne’s summer Budget? Not quite as welcoming as you might think.
On the one hand, families up and down the country were pleased with the announcement that, in future, children will be able to inherit properties of up to £1m from married couples without having to pay any inheritance tax.
However, it seems that this silver lining comes shrouded in a layer of thick cloud. “While many older home-owners will welcome the changes to inheritance tax, the downside could be to encourage those in the high value areas to continue to hold on to their homes for longer,” warns Lucian Cook, head of residential research at Savills estate agents.
“Downsizing is critical to the efficient use of our housing stock and recycling wealth between generations, which is an important means of helping younger households get on or trade up the housing ladder.”
In other words, older people will cling onto their ever more valuable homes, leaving nowhere for younger people to live.
Meanwhile, at the top end of the London market, Trevor Abrahmsohn of Glentree Estates is worried about the effect that changes to stamp duty are having on sales.
“The alterations to stamp duty were meant to be an antidote to mansion tax but transactions are down by 40 per cent, and the result is that less money is being raised in receipts for the Government,” he says.
“To make matters worse, limiting buy-to-let investors to the standard rate of mortgage interest relief is a bit of a travesty. Most buy-to-let owners are not well-to-do people. They are small-scale investors trying to ensure that, when the time comes, they have a reasonable private pension and are not a burden on the State.
“On the other hand, let us all cry a loud Hallelujah for the inheritance tax changes. That said, though, if you’ve got two children sharing the £1m, and getting £500,000 each, that’s barely going to buy them a two-bedroomed flat in London.”
The NAEA Propertymark also has reservations. “Increasing the inheritance tax relief threshold will create tax incentives for estate holders to remain in one property for longer periods of time,” says NAEA Propertymark’s managing director Mark Hayward.
“This will have a knock-on effect lower down the property chain. The ability to own a home is an aspiration built within our psyche, and the Government needs to act to ensure that first-time buyers are not driven out of the property market once and for all.”
If young professionals are unable to buy, they will need to rent. Letting agents are concerned that hitting landlords in the pocket will limit supply.
David Cox, managing director of the ARLA Propertymark adds: “At a time when the supply of rental property is already struggling to meet demand, it is dangerous to try and reduce growth in the rental market.
“The Chancellor has also replaced the wear and tear costs to a new system that means landlords can only deduct the exact amount that they incur.
“The unintended consequence of this, combined with the reduction in income tax relief, is that landlords will seek to recoup their costs by hiking up rents.
“As a result, tenants will have to save for longer to be able to afford a deposit for a house, as more of their income will be eaten up by rent.”
A measure which could have an effect on the prime property market, especially in London, is the revision of the “non-dom” regime. From 2017, non-doms will pay inheritance tax on residential property held offshore. Any non-dom who has lived in the UK for 15 years will be liable for all taxes and permanent non-dom status will be abolished altogether in 2017. Agent reaction to this shift in policy is divided. While some agents have complained that the Government risks alienating the super-rich, others have argued that the impact on the overall super-prime market will be marginal because non-dom status is only one of many factors influencing the super-rich offshore buyers and because these buyers are by no means the only people driving property values.
One person prepared to pat Mr Osborne on the back, though, is Spencer McCarthy, chairman of retirement housing providers Churchill.
“This is a welcome change,” he declares, and, what’s more, he is prepared to go further. “We want to see changes to the planning system, such as creating a specific class category for retirement properties, equivalent to affordable housing.”
So a mixed reaction from the property sector, perhaps not quite the unambiguous ringing endorsement the Chancellor might have hoped for.
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