What will the budget changes mean for the capital’s property market?
As George Osborne increases the inheritance tax threshold to £1m for married couples by 2017 and cuts mortgage interest relief on buy-to-let homes, Andrew Ellinas, Director of Central and North West London agency Sandfords, comments on what these changes will be mean for the Capital’s property market.
“Changes to inheritance tax, allowing married couples and civil partners to pass on assets worth up to £1m including a family home, will be very welcome news to many people, particularly homeowners in London and the south east. Here, many people have seen the value of their properties soar in recent years fueling concerns over the amount of tax their estate would incur after their death.
On the whole, I think it will cause greater liquidity in the market. It is also possible much of the additional money (up to £140,000) children will receive on inheritance of their parents’ estate will often go back into the housing market as they choose to upsize or invest themselves.
Since cutting the amount of tax relief landlords can claim is to be “phased-in” over the next four years, the impact of this will take some time to be realised. I believe it is possible we could see a number of landlords opting to sell up because they do not want to suffer the loss of the tax advantage, particularly in London where the average mortgage loan is likely to be higher. This, in turn, would however bring those properties back to the market place, supporting stock levels and freeing up housing for the owner occupier market.
The changes are unlikely to impact wealthier landlords, but rather be most detrimental to those people who have perhaps bought one or two investment properties, with a view to funding their future retirement.
Making buy-to-let less attractive will most certainly calm activity in the buy-to-let market.
Abolishing permanent non-dom tax status is also an issue because with so many foreign buyers in London this is likely to have a negative effect at the top end of the market.