Roundup of the UK Property Market in 2015

It’s the end of the final quarter of 2015; let’s take some time to look at what’s happened in the UK’s property market this year. There have many changes that have had a significant impact on the property landscape this year.

The Conservative government have introduced many new rulings that affect the top end of the UK market quite heavily. Examples of these include:

  • Stamp Duty Changes
  • Enveloped Property Tax
  • Non-Dom Reform
  • Buy-to-Let Taxation

Early market reports suggest that the property turnover has dropped by 30% compared to 2014, with Nationwide declaring that the supply of homes for sale is the lowest it’s been since the 1970s. Let’s take a more in-depth look at how these have affected the market and the changes they’ve forced.

Stamp Duty Changes

There have been multiple changes to Stamp Duty this year, with the initial impact being on the amount of tax you pay compared to the price of the property. While this was announced at the end of 2014, it has been a major player in 2015 seeing the housing market spike in the early months with a huge increase in sales of properties in the £251,000 and £925,000 band. However, high end property has seen a huge hit due to the staggering amount of stamp duty on each purchase.

In addition to this, George Osborne has also announced that buy-to-let landlords and people buying their second home will also have to pay more in stamp duty.

For investors, this could be a very damaging policy, seeing an additional 3% surcharge to each band. This would mean that the stamp duty paid on an average buy-to-let property worth £184,000 rising by an additional £5,520 – meaning that most landlords will lose around a year’s worth of rental income through this tax.

 

Read more: What is the Future for Buy-to-let Investors?

 

Enveloped Property Tax

In addition to Stamp Duty and council tax, Annual Tax on Enveloped Development (ATED) has been brought in to collect an additional tax on property valued at more than £1 million. You will need to pay this if your property matches certain points which can be found on the government website here.

This has caused a huge slump in high end property in London as, combined with Stamp Duty, the purchasing and running costs of these properties have sky rocketed.

As of 1 April 2016 there will also be an ATED of £3,500 on properties that are valued between £500,000 and £1million.

Non-Dom Reform

There are big changes being brought in to taxing property bought by individuals who do not live in the UK. This is a very risky move as it could prevent a huge amount of investment from overseas buyers, but it does provide a more level playing field for domestic investors.

While this is a good step for various other tax reasons, it could prove to be a hindrance to the development and purchase of high end locations within the UK.

Buy-to-Let Taxation

As mentioned previously, there will be a change brought in to the Stamp Duty being paid by landlords but this is only one of the new changes in this field. The government is also removing the interest relief at the top rate of tax for landlords, meaning that they have to pay more towards their properties.

This shifts the market slightly more in favour of homeowners rather than investors, as buy-to-let properties will have less of a profit margin on them.

Further to this, a new EU Mortgage credit directive has been introduced that will affect the supply of credit. Lenders are now required to make the distinction between professional and consumer landlords, with those labelled as consumer landlords being required to pass affordability tests in the same way homeowners do.

Those are the major changes for 2015 in the property market, but what impact has this had on you as an investor? Leave us a comment below to share your thoughts.

Article By Ben Lloyd

January 25th, 2016

Ben is the Director and Co-Founder of the Pure Group and Managing Director of Pure Property Finance.

Following a career in Barclays, where Ben was in the real estate finance team for 8 years, he decided that the market needed a more forward-thinking type of commercial brokerage so founded Pure Commercial Finance (now Pure Property Finance), the first company within the Pure Group.

Ben has extensive experience across the real estate sector and has participated in over £2bn of real estate transactions during the course of his career.

Ben oversees the general strategy at Pure Group and works with the senior leadership team to drive the Group forward. Ben is also on the Executive Committee of FIBA.

See more articles by Ben

Ready to talk finance?

Call us and speak to one of our experts

02920 766 565 Request a Callback