This March, millions listened with bated breath as Chancellor George Osborne announced significant changes to the UK Budget. Generally, the strength of the UK economy has improved, leading to a renewed confidence in the profitability of the property sector. Here, we’ve outlined the changes that are likely to have the biggest impact on property investors.
In last year’s Autumn Statement, Osborne announced the introduction of Capital Gain Tax for overseas investors. Investors who are not UK residents are now charged between 18% – 28% of any profits made from the sale of their property. Interestingly, this legislation extends to off-plan properties too.
Changes to investors’ personal tax-free allowances will free up more funds – the threshold will be raised to £10,600 from April, and is expected to reach £11,000 by 2017/18. The increase of the 40% tax band to earnings over £43,000 has also left millions better off.
Helping first-time buyers
The Government has been under pressure in recent years to introduce measures that help first-time buyers onto the property ladder. The Help to Buy scheme is designed to give savers a helping hand – for every £200 they save towards their first purchase, the Government will contribute £50 (capped up to a maximum of £3,000). Though the scheme will provide much-needed capital to anyone who is are keen to own their property, those within the industry are concerned that the measure will only increase demand for property and push up prices as a result.
Expanding options for pension holders
For the first time, UK residents who reach retirement age will be able assign the right to their annuity payments to a third-party in return for a lump sum. Previously, pensioners were able to buy a lifetime annuity that exchanged their pension fund for a regular income. The only alternative to this model was to purchase a flexi-access drawdown fund or a flexible annuity, but these facilities are traditionally only used by those with over £100,000 worth of funds.
This move is, in effect, creating a secondary annuities market. Now that those of pension age can release more funds and potentially use them to buy equity, there’ll be another surge in demand for property, driving price growth even further.
But what about meeting the demand for new housing?
Many are criticising the Chancellor’s decision not to focus on the development of new (and affordable) properties to house our ever-growing population. In 2013/14, only 141,000 homes were built in the UK – less than half the number needed to meet current demand. Granted, the Government is planning to construct up to 28 new housing zones across the country, which will go some way to spurring economic growth outside of London, but if demand for properties increases and supply remains limited, this imbalance will have a continued impact on the opportunities available to investors.
Moving investment away from London
Several key regions are set to benefit from targeted growth. There’s been much talk of the Northern Powerhouse, a vision that’s intended to boost infrastructural and regeneration plans in areas like Manchester, which is set to undergo exceptional development in the next few years. Shifting the focus away from the capital, which has typically been seen as the property ‘hotspot’, will encourage investment in up-and-coming areas and allow investors to take advantage of competitive deals on new developments.
You can learn more about how the changes proposed in the 2015 Budget will affect your property ventures by contacting Surrenden Invest today.
- Attracting investment is about more than just designing a beautiful-looking building in a well-connected city centre. Those things help, of …READ MORE
- Liverpool is familiar territory to the Surrenden Invest team. This thriving city offers some superb property investment opportunities, so as …READ MORE
- Manchester has already benefited immensely from Chinese investment, and now it could be India’s turn to fall in love with …READ MORE