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Category: July 2020

UK’s most Affordable Locations to buy Property

Contrary to the doom-mongers, the UK property market has picked up again post-lockdown. But where should you be looking in order to get the biggest bang for your buck?

Well, according to a report by property portal Zoopla, you should be looking northwards – to County Durham and Ayrshire in Scotland, more specifically.

The portal based its findings on the cheapest places to live in the UK by comparing property prices to the average salary. Top of its findings was Shildon in County Durham where the average property comes in at around £60,000 for a two-bed terraced house and just £40,000 for a two-bed flat.

You will get a house with garden for an average of £74,000 in Cumnock, East Ayrshire where the earnings ratio is 2.39, thanks to the fact the average salary there is £31,000.

Lockdown has, of course, resulted in more employees than ever before working from home. And this means that these ‘out of the way’ towns and villages are becoming more practical locations to live in. Property there tends to be larger, more affordable and come with a decent-sized garden – making it much more of a bargain than an inner-city apartment.

After Shildon and Cumnock, Zoopla’s top locations were: Ferryhill in County Durham, Peterlee in County Durham and Cleator Moor in Cumbria.

Property market starting to soar, says Rightmove

Lockdown appears to have been a mere aberration to the UK property market – if Rightmove’s July Index, published today, is anything to go by.

In fact, it’s as if lockdown never happened, with property enquiries 75 per cent up on the same period last year. Prices too are an average 2.4 per cent higher than in March this year when the market closed due to coronavirus. That’s equivalent to an increase of £7,640 per property.

Stamp duty holiday already having positive effect

What does appear to have affected it though is the Chancellor’s announcement last week of a Stamp Duty Holiday until March 2021. That had the effect of doubling agreed sales from 15 to 35 per cent within just one week.

So, what do the figures show? Well, the average property has increased by 3.7 per cent compared to July 2020. And that’s the biggest monthly increase since December 2016.

First time buyers given mortgage life-line

Not only that, but first-time buyers are being given a chance to climb onto that ladder too with an increase in the number of 90 per cent mortgages around.

Scotland’s property market is now fully open which Wales is almost 100 per cent open. This means sales for next month are expected to be even higher.

Scotland best year-on-year prices

When it comes to the regions, Scotland has the highest jump in prices, with an increase in the average property value of 5.3 per cent. Just behind, with a 5.2 per cent increase is Yorkshire and Humberside. The East Midlands has the third highest year-on-year rise of 4.8 per cent.

North of England and East of England poor annual rise

Lowest annual rise is the South East at 2.2 per cent, while the East of England and the North of England only have a 2.5 per cent annual rise.

Rightmove described the news as a ‘mini boom.’ Analysts there attributed the accelerated sales numbers to the desire of home owners to alter their lifestyles post-lockdown and to Chancellor Rishi Sunak’s Stamp Duty holiday. Many estate agents have already reported on a large increase in people enquiring about village and countryside locations post-lockdown. Houses with gardens and super-fast broadband for home-working have also become highly sought-after.

One Cambridge-based estate agent said: “We haven’t seen a market this competitive in years and we expect it to get busier still as the stamp duty slash starts to take effect… there has been a misconception among sellers that the market is quiet and depressed when in fact it really is completely the reverse.”

Rishi Sunak set to overturn Capital Gains Tax system

Capital Gains Tax (CGT) is the latest budgetary issue to come under the radar of Rishi Sunak. And not in a good way for thousands of property investors and home owners, it appears.

In commissioning a review by the Office of Tax Simplification (OTS) yesterday, the Chancellor is believed to be considering altering the current system. This is directly in relation to exemptions, relief and allowances. In March he slashed the Entrepreneur Lifetime Relief from £10m to £1m.

In explaining the move, Mr Sunak said he wanted to “simplify” CGT.

He added: “In particular, I would be interested in any proposals from the OTS on the regime of allowances, exemptions, reliefs and the treatment of losses within CGT, and the interactions of how gains are taxed compared to other types of income.”

Move to make up for stamp duty cuts

Many analysts say the move is in an effort to make up for the money the government is expected to lose by extending the Stamp Duty threshold to £500,000 before tax is paid.

That came into force on Monday and means property investors and those with second homes are due only the three per cent surcharge. It looks set to lose the government £3bn a year. A reduction in VAT for the hospitality sector will have a similar effect in cutting income the government receives from the tax payer.

Meanwhile, CGT brought in the government £8.8bn for the year 2017-18. That’s equivalent to paying a tax of 15 per cent, according to the OTS.

Corporates not subject to change

Any CGT changes will affect individuals and small to medium-sized businesses – rather than large corporate groups.

Current CGT tax rates on property are 28 per cent for those in the higher and additional rate categories, and 18 per cent for basic rate taxpayers.

House prices won’t recover until 2023 says Think Tank

Chancellor Rishi Sunak’s Stamp Duty Tax cut won’t prevent house price falls over the next few years says a leading economic think tank.

The Centre for Economics and Business Research (CEBR) is expecting a five per cent fall in property values this year and double that in 2021. In addition, they don’t see prices reaching pre-pandemic levels until 2023.

Stamp duty cuts won’t push prices up

This is despite Sunak’s Stamp Duty Tax cuts saving buyers of properties valued at up to £500,000 in particular, making deposit’s more affordable and additional spending for home improvements. CEBR analysis says the cuts will result in a mere six per cent more property transactions since the average buyer is only saving around £4,400.

Also, Stamp Duty changes tend to affect the number of transactions rather than property prices.

The biggest house price drop is predicted to be in September and October when the mortgage holiday and furlough schemes end. At that point more redundancies are expected. The CEBR have also ruled out any hopes of a V shaped recovery in the property market.

The Bank of England predicts a 16 per cent drop in property prices this year, with Knight Frank suggesting seven per cent.

Meanwhile, although RICS said property sales had increased in June, no-one is holding their breath…

Coronavirus results in countrywide cash-in

Vendors of countryside properties are ‘cashing in’ on the coronavirus rush to get away from busy cities – and London in particular.

That’s according to several big estate agencies dealing with such rural retreats. Frank Knight reports that their more expensive country properties are selling for as much as 17 per cent over the asking price.

Panic buying for rural idylls

The rush by wealthy city dwellers to leave the capital has seen ‘frenzied activity’ in southern rural idylls, especially in locations such as the Cotswolds.

Jonathan Bramwell, of The Buying Solution, said he witnessed a buyer instruct his solicitor after just one viewing and exchange contracts within a week. Countryside estate agents said 15 per cent of registered buyers between April and May were from London – double the number than usual.

Properties priced between £2.5m and £3.5m in both Suffolk and Sussex are now regularly getting up to 10 per cent over the asking price. The number of buyers for such properties has jumped from four to 10 year-on-year.

Even wealthy buyers hit by restrictions

Strutt & Parker estate agents in Salisbury recently sold a £2m property for £200,000 over the asking price. But analysts warn the mass exodus of wealthier couples and families from London can’t continue. The stock market is expected to be badly hit when the government furlough scheme ends in October. At the same time finance lender restrictions will get even tighter.

The value of homes valued at £5m and upwards has increased by 1.2 per cent between May and June, says Frank Knight. At the same time, offers on countryside properties within travelling distance of London, priced between £5m and £10m, is 182 per cent higher than the five-year average.

Sunak to slash stamp duty for 6 months

The Chancellor of the Exchequer is expected to deliver an economic update on Wednesday as he outlines plans to increase the stamp duty threshold up to £500,000 for the Autumn Budget.

Sunak is expected to announce a 6-month stamp duty holiday to facilitate Britain’s flailing housing sector, according to source reports.

He is understood to be drawing up plans to raise the tax threshold as high as £500,000 to remove most home buyers from the scope of stamp duty to try and help the UK economy.

He will reportedly reveal plans this week to increase the threshold at which people start paying stamp duty on house transactions. This new threshold will he put in place for 6 months and is expected to be set between £300,000 and £500,000.

First time buyers are already exempt from paying stamp duty up to £500,000 in London, and £300,000 in the rest of the UK.

Property sales in April fell to their lowest levels since records began, according to HM Revenue & Customs figures.

A 0.2% month-on-month decline in May followed a 0.6% drop in April and 0.3% fall in March – seeing the average house price stand at £237,808.

Mr Sunak is set to give an economic update to MPs on Wednesday but it is understood the stamp duty holiday will not be announced until the next Budget.

Bank of England reports huge fall in mortgage lending

There may have been a surge in English house transactions after lockdown restrictions were lifted on May 13, but the pent-up activity hasn’t translated to mortgage approvals. Far from it.

Latest figures from the Bank of England show that lending for house purchases was 9,300 in May – a drop of 6,500 less than in April when the full force of the shutdown was felt. That figure was 90 per cent less than in February this year. At the time around 140,000 new loans had been approved between January 1 and February 29, indicating a growing and healthy UK property market.

Fear lenders will ask for bigger deposits across board

Last month the majority of lenders pulled 95 per cent mortgage deals. That effectively freezes the majority of first-time buyers out of the market.

Now analysts are worried that lenders will start asking for bigger deposits across the board, causing the market to stall, rather than re-assert itself by the end of the year.

Meanwhile, lending for re-mortgages is also down with a drop of 40 per cent since February this year to 30,400 approvals. According to the Bank it’s the lowest since their records began, back in 1993.

Uncertain economy putting off home buyers

But it’s not only the reluctance of lenders that is holding back buyers. Understandably, uncertainty over potential job losses is also a big stumbling block for many individuals who had planned to move before the coronavirus pandemic hit.

In the meantime, the resurgence of buyer interest is expected to boost lending figures next month. Whether those levels will be even half of the pre-lockdown figure remains to be seen.

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