Doncaster Property Blog » February 2020

Monthly Archives: February 2020

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What is going to happen to Stamp Duty on 11th March?

If you are buying a home in England costing more than £125,000, you will have to pay Stamp Duty Land Tax on the purchase of your new home. In the provinces, it’s called something slightly different, so if you are buying a property in Scotland over £145,000 you will pay Land and Buildings Transaction Tax (LBTT) and for any property over £180,000 in Wales you will pay Land Transaction Tax (LTT). Whatever the tax is called, it is an important factor when moving, when you consider that

Last year the average UK house buyer paid

£10,150 in Stamp Duty Tax alone

Now as soon as the date for Rishi Sunak’s budget was set for 11th March 2020, conjecture in the Press began about what stamp duty changes he may disclose on budget day. The Chancellor only sets the budget for England and Northern Ireland, yet this is just as relevant for Wales and Scotland. Even though Derek Mackay, the Scottish Finance Secretary said on 6th February he has no plans to change Scotland’s version of Stamp Duty (LBTT), more often than not, Stamp Duty rule changes in England are often adopted in Wales and Scotland at a future date.

Some are asking if Sunak will impose what was promised in the Conservative manifesto with the 3% additional Stamp Duty surcharge on non-UK resident buyers? I have certainly heard in the Estate Agent community that foreign buyers are trying to rush through their sales in central prime London (Park Lane/Mayfair etc etc) before 11th March to ensure they don’t get hit with a new tax. Or will he go even further, and will we see a reappearance of Boris Johnson’s hitherto specified aim of eliminating Stamp Duty below £500k, consequently theoretically saving homebuyers many thousands of pounds?

However, opinions are divided on what, if anything, will be included in the budget.

Most believe that the extra 3% for foreign nationals is an almost certainty, and if it isn’t implemented straight away, it will be in the Autumn Statement. Many believe the Chancellor could also decide to repay the favour to those in the North who turned the Election map ‘blue’ on the evening of 12th December with actions to enhance the housing market north of the M62 with stamp duty changes. The best way he could do that is to raise the threshold from the current £125k.

When Boris ran for Tory leadership back in May 2019, he said that he wanted to expand the threshold at which you begin paying stamp duty from £125k to £500k, which when you consider 7 out of 8 residential sales in 2019 were for homes below £500k, that would have a considerable effect. If the Stamp Duty threshold had been raised to £500k in 2019, then 700,400 homebuyers in England would not have paid any Stamp Duty Tax.

98.5% of Doncaster properties sold last year were below £500k

Of the 5,896 properties sold in the last 12 months in Doncaster, only 88 of those properties sold were over £500,000 (interesting when compared with Greater London where 44.9% of properties were below the £500k level).

Yet the cost to the HM Treasury would be significant. If all properties below £500k were exempt, the government would lose £2.22bn in tax receipts according to Savills. Of course, this could be made up with extra tax on empty properties or increasing the second homes Stamp Duty levy from the current 3% to say 5%, which would raise an additional £1.12bn on top of the current £1.68bn it raises for the Treasury, yet it would have a negative effect on buy-to-let landlords buying additional homes.

What almost unquestionably won’t happen is the earlier idea of switching the Stamp Duty liability from homebuyer to home seller

this would stall the property market, would probably cause political fallout among 688,300 homebuyers who paid Stamp Duty last year alone, make homes ‘appear’ more expensive as house sellers would inflate the asking price to try and recoup some of the tax, yet ultimately could be seen as ‘re-arranging the deckchairs on the Titanic’.

The 3% additional levy for foreign buyers is almost certain (of which we don’t get many in Doncaster – as they tend to buy in prime London areas which is of course the City of Westminster and the Royal Borough of Kensington & Chelsea, and parts of the boroughs of Hammersmith and Fulham, and Camden), yet I have a feeling that ultimately the Government doesn’t want to rock the boat on the wave that is being rode by the property market on the ‘Boris Bounce’ since December. I also doubt any changes will be made to first time buyer Stamp Duty relief, as 22% of all property transactions in 2019 were to first-time buyers, and whilst it cost the Treasury (or saved the first-timer buyers) a total of £539m in Stamp Duty relief (an average of £2,411 each), the Government are keen for first time buyers to get onto the housing ladder.

Ultimately, we can only wait until Mr Sunak opens his red leather box on 11th March to find out what will happen. I will of course report back after 11th of March on what (if any) changes to the tax regime will affect the Doncaster property market going forward.

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… the Rollercoaster of the last Decade

Ah the 2010’s, the tens, the teens – I am not sure what we are supposed to call the decade that has just gone. No matter what it was called, the last decade was a tough one, so does it really matter that we never really got around to giving it a name? Some might say, whatever one calls it, coming to an end is the most fundamental job any teen (and I refer to all humans) could possibly do!

The last two decades have certainly been tumultuous. At least for this decade we have just started we can say, in a few decades time, things like “That style is so ’20s” and fellow humans will essentially know what you are talking about. If you come of age in this decade, you will be a ’20s child and we will discuss ’20s politics and ’20s style and all the things that hadn’t been created on the 31st December 2019; the time that two nameless decades ended and how finally there was something everyone in the UK could agree on: the name of the decade. Hey – it’s a start!

So, what has happened to the local Doncaster property market in the last nameless decade?

The average Doncaster property has risen in

value from £137,000 to £160,400 in the last 10 years

… meaning each Doncaster homeowner has seen a profit of £45.00 per week for those last ten years. Rolling the clock back to the start of the last decade January 2010, and the economy (and housing market) were recovering from the Credit Crunch and the worldwide financial crisis. A decade on and things feel a little different. If you bought a Doncaster home over the past 10 years, things have certainly changed.

Doncaster property values rose 17.1% on

average over the last decade

yet taking inflation into account, they fell in real terms by 15.9 per cent.

Compare that to a 42.5% rise in the ‘80s, a 13.2% drop in the ‘90s and rise of 62.8% in the 2000s in real terms. So, in real terms after inflation, there has been a decrease in house prices in Doncaster in the past decade making homes today more affordable than a decade ago.

On average, 1.12 million homes were sold each year last decade, although that was 26.4% less than the decade before (the noughties) when an average of 1.52 million properties were sold annually.

So, what are the underlying issues in the Doncaster (and wider UK) property market when, in real terms, property is essentially cheaper than a decade ago?  Whilst the newspapers tell us first time buyers can’t get on the housing ladder and the housing market is in gridlock – what is the problem? Well I am a firm believer in the adage ‘bad news sells newspapers’ because the truth is something completely different as 32.7% of homes last year were bought by first time buyers compared with only 22.8% in 2009.

Yet, there are still issues; mainly a persistent lack of not building enough new homes which curtails the supply and choice of property; but stagnated wages, stiffer mortgage rules and homeowners not moving as much as previous generations are all contributing to the problem. In the UK, the number of homeowners who moved in 2019 was around 14% higher than in 2009, yet this was still just under 50% lower than the average for the noughties. It’s all up and down like a rollercoaster!

My thoughts for the future are based primarily on what will happen to interest rates. Throughout the last decade, the Bank of England base rate was 0.5% at the start and was cut to 0.25% in the Summer of 2016. Even with the increase to its current level of 0.75% in the Summer of 2019, it has made borrowing money on a mortgage very cheap indeed. Nonetheless, bank/mortgage rates will rise again and I am concerned about the effect upon the housing market. Now it won’t be as bad as previous times when mortgage rates went up in the 1970’s and 1980’s (with mass repossession) because the tougher mortgage rules introduced in April 2014 will have ensured borrowers were stress tested on their affordability if interest rates shot up.  Most borrowers have been stress tested on their affordability to mortgage rates of up to 6% – 6.5%, which would obviously squeeze household disposable incomes yet stop people losing their homes due to repossession. Whilst I am not giving advice, just personal opinion, if you are one of the 29.3% of homeowners who isn’t on a fixed rate – maybe you should seriously consider doing so?

The 2020’s will be an interesting decade – and if you want to be kept up to date with what is happening in the Doncaster (and wider UK) housing market – follow me and this blog to read similar articles to this one.