Residential Property Review – December 2018

Our monthly residential market review is intended to provide background to recent developments in property markets, as well as to give an indication of how some key issues could impact in the future.

Government revenue from Stamp Duty falls by 10%

HM Revenue and Customs (HMRC) have stated that Stamp Duty revenue from residential property sales in Q3 2018 has fallen from the £2.605bn seen in the same period of 2017, to £2.347bn in 2018, as the number of properties liable to tax fell from 302,700 to 279,500.

Several factors have been cited, including the devolution of Stamp Duty revenue to Wales and a large reduction in duty payable by first-time buyers. Additionally, there has been a dramatic fall in numbers of house purchases in the London region, where estate agents say high taxes have “suffocated” the market.

To put this in perspective, a buyer of a £1 million home in the capital – such as a relatively modest three or four-bedroom terraced home – would be paying £43,750 in tax, whilst an upmarket £3 million home would see a Stamp Duty charge of £273,750.

Top end £1 million-plus mortgages now at all-time high

The Financial Conduct Authority (FCA) have reported that £1 million-plus mortgages have reached their highest level since records began in the first quarter of 2014.

The figures show that 820 mortgages, averaging £1.6 million, were approved in the three months to September this year, bringing the total value of loans within this bracket to £1.37 billion and representing a 47% increase on the previous quarters borrowing at this level.

The residential research director of estate agents Savills, Lucian Cook, commented on these findings: “Despite taking on over £1 million of mortgage debt, families want more space for their money. If you’ve got a loan of that size, you want a house that will meet your needs over a prolonged period.

Ray Boulger, of mortgage brokers, John Charcoal commented: “I’m surprised by the figures bearing in mind the number of transactions generally has fallen this year and the top end of the London market has been soft for some time.

Yorkshire firm revolutionises house building process

Ilke Homes, a Yorkshire-based manufacturer of fully-fitted, three-bedroom, pre-fabricated houses, have started delivering their first homes across the country. They plan to produce eight homes a day, at a factory cost of between £65,000 and £79,000, depending on specifications. However, these figures do not include the cost of land, on-site assembly or the connection of services, which could double or triple the final price.

Their unique manufacturing process will reduce the construction time of a traditionally built home, from the current average of forty weeks, to just ten days. The company has plans to produce 2,000 houses a year initially, increasing output to 5,000, which would make them one of the major volume housebuilders in the country.

House Prices Headline statistics


House Prices Price change by region

AVERAGE MONTHLY PRICE BY PROPERTY TYPE – OCT 2018

Mortgage Activity

  • Jackie Bennett,
    Director of Mortgages at UK Finance

Source: UK Finance
Release date: 12/12/2018

BUY-TO-LET – WHAT DOES THE FUTURE HOLD?

Being a buy-to-let landlord is much tougher than it once was. Many landlords entered the market a few years ago, attracted by the low interest rates they were charged for borrowing money, and the tax relief that was available to them on their mortgage interest payments.

However, during George Osborne’s Chancellorship, changes in the tax rules were announced that reduced the mortgage interest tax relief available, and additional rates of Stamp Duty (and equivalent taxes in Wales and Scotland) were imposed on those buying second homes or buy-to-let properties. This means that landlords are set to find their income tax relief on mortgage interest restricted to 20% by 2020. Plus, the recent rise in interest rates has meant the cost of borrowing has gone up. More landlords are setting up as limited companies for tax reasons; 18% of private rentals in England are now owned by limited companies.

BUY-TO-LET ISN’T DEAD YET

Despite the tax changes and the potential for buy-to-let mortgage costs to rise, landlords are still entering the market. Renting remains buoyant; plenty of people prefer to rent or feel priced out of the property ownership market and need somewhere to live.

If you’re thinking of becoming a buy-to-let landlord, it makes sense to begin by working out how much it is likely to cost to buy a property, what your borrowing costs will be, and what expenses you’ll incur putting it on the rental market.

You’ll need to factor in all the associated costs, such as gas and electricity safety inspections, insurance, regular maintenance and any agent’s costs, if you intend to use a letting agent. Then you’ll need to work out how much rental income you’re likely to make, including any periods where the property might be empty, and you won’t be receiving rent. This calculation will help you assess whether this type of investment is worthwhile for you.

When looking for a property, one near good transport links and with easy access to local amenities is always likely to be attractive, so choosing the right area is important. It also pays to form a view of the type of tenant you expect to attract; that way you can opt for the right décor. If you’re aiming to attract students, clean and comfortable would work, but if you’re thinking of young professionals, something more modern and stylish might be more appropriate.

A mortgage is a loan secured against your home or property. Your home or property may be repossessed if you do not keep up repayments on your mortgage or any other debt secured on it.

PREPARATION IS KEY TO STRESS-FREE HOME BUYING

A recent industry survey showed that 41% of people feel stressed by the mortgage process, taking the fun out of looking for a new home.

This needn’t be the case and by following these top tips you can stay in control, save money and enjoy the experience.

SAVE, SAVE AND SAVE

In most cases, the bigger the deposit you can put down and the less you need to borrow, the lower your interest rate is likely to be. Don’t forget that your savings will also need to cover other charges like legal fees and survey costs, so budget for them to avoid any nasty surprises.

MONTHLY OUTGOINGS

It pays to take a long hard look at your income versus your outgoings; any lender considering your mortgage application will expect you to be on top of your bills and to be able to afford your monthly mortgage payments. Check your standing orders and subscriptions and cancel any you can manage without. Also, keep a keen eye on how much you spend on luxuries like entertainment and meals out.

CHECK YOUR CREDIT SCORE

Lenders will expect you to have a healthy credit score. A higher score usually means you are a lower risk; the more points you score the better the chances that you’ll get credit at better rates.

GET PROFESSIONAL ADVICE

Getting advice will save you time, money and stress. We are on your side, have access to a wide range of mortgage deals, know the industry and can offer useful advice on all aspects of the home buying process. We can help you get an in-principle decision from a lender, which gives a seller the confidence that you are a serious purchaser.

KNOW YOUR ESTATE AGENT

First-time buyers with mortgage offers in place are attractive to sellers as they can proceed more quickly than another buyer who has yet to sell. Make sure that the estate agent is aware of your position, so they can pass this information on to sellers. Keep in regular contact and build a rapport with the agent.

DON’T FORGET THE SURVEY

Once you’ve found somewhere you want to buy, make sure you get a professional survey. A surveyor will identify structural problems that could be expensive to remedy.

A mortgage is a loan secured against your home or property. Your home or property may be repossessed if you do not keep up repayments on your mortgage or any other debt secured on it.