Membership of the European Union (EU) presents the greatest uncertainty for UK real estate in 2016/17. We expect the UK real estate market will move into a new stage of the property cycle and will potentially face a number of obstacles: an in-out EU referendum within the next 18 months, new regulation coming into force, and a potential end to more than six years of record-low interest rates, resulting to a very different year to 2015.
TAX UPDATE: ‘WEAR & TEAR’
From 6th April 2016 we will see the abolition of the ‘wear and tear’ tax allowance on furnished lets. The government will bring back the replacements allowance instead – Geraint Jones, Director at BKL Tax remarks that ‘..clients with buy-to-let properties which need replacement furniture are well advised to wait until after 6th April 2016 to benefit from the new allowance.’
STAMP DUTY & THE BUY-TO-LET MARKET
Following the Autumn Statement on 25th November last year, Osborne’s proposed 3% Stamp Duty increase for people buying second homes including buy-to-let is not expected to affect those buying in bulk (15 units or more) or those buying through companies. We expect investors looking to buy at large discounts will be able to take advantage of this. Banking services provider, Kent Reliance, reported one quarter of all buy-to-let mortgage finance demand is now through limited companies, up from 13 per cent a year ago. For the whole buy-to-let market this means that around 57,000 buy-to-let loans could be issued to companies in 2016, assuming total lending does not grow. This is an increase of over a fifth, compared to the estimated total for 2015, which was 46,700 and up 90 per cent on 2014. Specific criteria on buy-to-let and second homes is due to be released by the treasury in April, which we expect to have a knock on affect, potentially sending rents higher due to fewer landlords in the market.
London is seeing a large number of new-build properties coming to market which is due to outstrip demand over the next 18 months. This is reflected by the number of profit warnings coming from some developers with big exposure to the London residential market. There are set to be more than 7,500 unit completions in 2016/17 (properties that are expected to sell at or above £1000 per square foot). This is almost double the amount of completions during the previous two years. We anticipate investors will be able to buy new-builds at very competitive prices, especially bulk purchases. For further information on UK tax: contact Geraint Jones at: firstname.lastname@example.org If you are considering buying a property in London please contact Nick Jaffray at: email@example.com