Gemma Harle's Budget prediction and analysis related to housing
19 October 2018
If you are looking for Budget predictions and analysis in relation to housing, please see the following commentary from Gemma Harle, managing director of Intrinsic mortgage network, part of Quilter.
Gemma Harle says:
CGT reduction for long term tenants
Landlords might be clinging on to the hope that there could be some respite for them in the upcoming budget, as the current tax environment has made it difficult for these investors to profit. One idea put forward by think tank Onward, is to remove CGT for landlords selling to tenants who have lived there for over three years. The thought process is that this might boost the supply of property and to help the tenants get their feet on the property ladder. The think tank estimates that this could create an average saving of £15,000 which would then be split between the landlord and the tenant. While this idea is well intentioned and could certainly be beneficial, it could also be abused. Depending on how the scheme was policed, unscrupulous landlords could higher their rents before selling to not only reap their half of the CGT relief but also that of the renter. Similarly, you could see families circumnavigate CGT by allowing relatives to rent for three years before selling them the house and saving on a fair chunk of tax.
Help to buy
With the end of the Help to Buy scheme looming in 2021 it’s likely that the Budget will contain some commentary on what will happen to the scheme in the near future. While the scheme has heralded some results, it is under pressure and has been widely accused of serving to inflate housebuilder share prices, alongside with some unintentional consequences resulting in homebuyers ending up as mortgage prisoners. Those who first took advantage of scheme five years ago and are looking to remortgage are finding they are trapped paying an expensive variable rate mortgage with few options from lenders elsewhere. The government therefore may choose to scrap the scheme and instead favour the Lifetime ISA as a means to boost home ownership thanks to its flexibility and the potentially confusing overlap in policymaking.
The last budget saw significant changes to stamp duty and we may see further tinkering in the upcoming one too. One change rumoured is the addition of a 3% surcharge of stamp duty for foreign buyers looking to buy property in the UK. The Prime Minister has claimed this additional money would be used to help rough sleepers which is likely to go down well at a time when she is facing a barrage of abuse from all sides due to Brexit. Additional stamp duty for foreign investors is likely to be seen as a fair option because foreign nationals are classed as people who don’t pay tax in the UK. A concern would be whether the sentiment impacts the London property market, which is already struggling. Some may also claim that this kind of move signals we are not open to foreign business at just the time when we want to do the opposite. In reality, an increase is unlikely to dissuade wealthy foreign investors seeking these ‘safe haven’ assets.