Author: Antony Antoniou

Savills in the Republic of Ireland took the unusual step of demanding detailed financial information from those wishing to view a new build scheme in County Dublin.

Savills in London told Estate Agent Today that this was following Covid-related advice from the Republic’s Property Services Regulatory Authority. “This is not policy over here [in the UK]” a Savills spokeswoman told EAT.

However now in the Republic there is a growing dispute over the vetting, with the country’s Data Protection Commission – the equivalent of the Information Commissioner’s Office in the UK – writing to Savills to express concern.

The Irish Times reports that the privacy watchdog in the Republic is planning to issue guidelines in relation “to the practice of seeking personal data in the context of property viewings”. The DPC is examining whether Savills had a legal basis to seek financial information from people wishing to view properties.

And the Irish Independent has carried an opinion piece with the headline: “Estate agent’s demand for proof of funds being seen as the latest example of the little guy getting kicked around.”

Meanwhile Irish housing minister Darragh O’Brien says he will contact agency trade groups about the practice by Savills.

“Requesting this level of info from a prospective buyer to view a home is simply wrong” he says.

“I’ll be writing to the Property Services Regulatory Authority on this and requests for excessive info prior to informing enquirers of house price.”

Agents in this country appear broadly supportive of the Savills tactic, with comments left on the EAT website suggesting this is a good way of ensuring viewings are for genuine buyers.

Here’s the background to the controversy.

Savills in Ireland issued a financial questionnaire. It asks whether those wishing to view are first-time buyers, investors or existing owners, and wants “evidence of all savings that will be used in the purchase” or “evidence of gifts from family members, if applicable.”

They are also required to provide “full proof of funds” in order to view the houses, which range in price from €395,000 for a mid-terrace to €565,000 for a detached house.

If it’s a cash purchase, Savills requests “a bank statement or letter from your solicitor confirming funds are available” and, at the very least, a mortgage approval in principle document, which includes the amount the bank is prepared to lend.

“Please note that if submitting letters from your mortgage broker, the loan amount must be visible. We cannot accept a redacted Approval in Principle” the email tells those who expressed an interest in viewing.

The data, from a Savills survey of around 750 buyers, adds that some 71 per cent of those currently mid-purchase have no expectation of completing ahead of the June 30 deadline.

Savills claims this means a potential stamp duty saving was not factored into their decision-making process.

A vast majority – 85 per cent- of those still hoping to complete in time said that failure to do so would not affect their transaction in any way, rising to 90 per cent amongst those buying above £1m.

“Lifestyle choices made during lockdown, or brought forward as a result of the experience of lockdown, have almost totally dominated decision-making in the prime market over the past year and look set to do so over coming months” says Frances Clacy, Savills’ research analyst.

She continues: “Buyer and seller commitment to moving over the coming year remains strong although slightly lower than in June 2020 when the market reopened after the first lockdown.

“The stamp duty holiday was announced in July, and while it may have brought forward some transactions, this survey tells us that it has not been the major motivator amongst equity rich home movers in the prime market.”

In its latest monthly market snapshot, the portal says asking prices rose 0.8 per cent – that’s the equivalent of £2,509 on the average asking price in just four weeks.

This was the largest rise at this time of year since 2015, and prices are now at a record in all countries and regions of Britain.

However, Rightmove says high prices combined with an all-time low in the number of available properties on agents’ books are starting to slow the pace. Buyer demand is still ahead of supply but  sales agreed in May were only 17 per cent ahead of the same period in 2019, slackening from April’s figure of 45 per cent.

The number of sales agreed on properties over £500,000 in May was 49 per cent above the same period in 2019, despite buyers knowing they will miss the maximum stamp duty saving that comes to an end in June.

In terms of the regional picture, Welsh prices rose by 14.6 per cent since March 2020; South West England prices are up by 11.4 per cent with properties selling more quickly than ever recorded previously by the portal.

Tim Bannister, Rightmove’s director of property data, says: “Buyer demand remains very strong, though with an all-time low in the number of properties available for sale on estate agents’ books and new stock at higher than ever average prices, there are early signs of a slowing in the frenetic pace.

“Since the market re-opened last May in England we have seen huge jumps in the numbers of sales being agreed, but these are now rising at a slower pace. Record low interest rates and stamp duty tax reliefs have helped many to afford higher prices, satisfying their pent-up desires for a new home fit for a new era.

“Some of that demand has now been met, and the phasing out of stamp duty reliefs has also taken away some of the urgency to move, though our high traffic and search data indicate that there is still strong buyer demand.

“However, higher prices combined with a lack of fresh choice coming to market are reducing some buyers’ ability or desire to move, and while we expect the market to remain robust, there are early signs of a slackening in the incredible pace of activity that we’ve seen over the last year. This super-charged activity cannot go on forever, but we expect the market to remain vigorous for at least the remainder of the year.”

CGT reform has long been mooted by the government’s own Office of Tax Simplification and announcements were expected in the Spring Budget, or later this year.

However, now Chancellor Rishi Sunak is reported to have dismissed the possibility of CGT increases as potentially too unpopular.

The government faces the huge cost of extravagant spending commitments over COVID 19, G7 climate change pledges, new social care policies and even a £200m Royal Yacht.

But The Times says Sunak has “ruled out a long expected increase in Capital Gains Tax on the grounds that it does not raise enough money to justify the political pain of introducing it, not least from [Conservative party] donors.”

In the spring a report commissioned by the government called for the doubling of Capital Gains Tax on profits from the sale of second homes including buy to lets.

The Office for Tax Simplification, set up by the government, said £14 billion could be raised by cutting exemptions and doubling rates.

If Sunak acted on the recommendation it is thought that basic rate taxpayers would be largely unaffected, but would still see their CGT tax bills rise from 18 to 20 per cent.

But higher rate taxpayers selling buy to let or second homes would see their CGT bills soar from 28 to 40 per cent, an increase that would amount to tens of thousands of pounds for many landlords in particular.

The OTS also wanted a major reduction in the Annual Tax Allowance, which currently sits at £12,300 but could be lowered to only £2,000.

The Times says the most likely target for raising money would be pensioners.

Treasury officials are examining plans to suspend the so-called ‘triple lock’ on pensions, saving £4 billion annually. Sunak’s department is also reported to be considering taxes for online businesses and gambling services.

This is down from a 9.9 per cent increase in the year to March. It’s the first fall in growth for almost a year, since last July.

The ONS data found that in the year to April average house prices rose by the greatest margin in Wales, up 15.6 per cent to £185,000. This was followed by England, up 8.9 per cent to £268,000.

In Scotland prices rose 6.3 per cent annually to £161,000, and Northern Ireland, up 6.0 per cent to £149,000.

For the fifth month on the trot, London had the lowest annual growth – 3.3 per cent. Amongst the other English regions, the North East saw the strongest growth at 16.9 per cent.

Experts are divided over how to interpret the reduced price growth.

PropTech entrepreneur and market analyst Anthony Codling says: “The data relates sold house prices, so the small reduction, in my view, will have reflected prices agreed by those who thought they might miss the March Stamp Duty Holiday deadline. Following the stamp duty holiday extension, I expect the house price data over the coming months show more ups than downs.”

Jeremy Leaf, north London estate agent and a former RICS residential chairman, comments: “The historic nature of these numbers, though the most comprehensive available, is likely to mean the small fall in monthly prices is a response to the anticipated end of the stamp duty holiday in March before they resume their upward trajectory following extension of the concession. Looking forward, our experiences on the ground tell us that market activity is set to continue at similar levels at least for the next few months, although increasing sales instructions will result in some price softening rather than a correction.

Karen Noye, mortgage expert at wealth management firm Quilter, states: “This may be the first signal of what is to come as it is likely buyers no longer feel that they can complete on a property before the June stamp duty holiday tapering and are exiting the buying market in response. The inflated house prices we have seen over the past year are linked to all the government schemes put in place to keep the market motoring during the pandemic so it is only natural that prices will drop as these schemes disappear.”

Meanwhile Nick Leeming, chairman of Jackson-Stops, adds: “Although the market has cooled ever so slightly following the mad rush at the start of the year, we still saw 13 buyers chasing every instruction across our branches in April. These buyers are very unlikely to meet the government’s stamp duty deadline and are proof that the market will remain strong during the second-half of the year, after the incentive has ended.”

Meg Hillier is the chair of the Public Accounts Committee, which is charged with overseeing government spending, has told other MPs in a debate: “We need to increase stamp duty immediately, while monitoring its effect, and we should increase it further for overseas purchasers.

“We should not have a housing market that has led to homes being owned by finance vehicles or absentee landlords who have no interest in it being a home but simply see it as an investment. Homes should be homes.

“Investment is all very well, but this is really damaging the future prospects of children in my constituency, some of whom will never have not only their own bedroom but maybe even their own bed between now and when they hopefully earn enough money to leave home, although frankly we are a long way off their earning enough money to buy a £750,000 flat.

“The government really need to step up. They talk about levelling up, but that is certainly not happening for many people in my constituency.”

Hillier is Labour MP for Hackney South and Shoreditch, and in the House of Commons Register of Interests’ Land and Property section has an entry dating back to 2015 saying: “A property in London from which rental income is received.”

In the debate Hillier also said: “The stamp duty holiday has been helpful to many people, but all that contributes to fuelling demand for housing while the government are not increasing supply.

“Those rising house prices put homeownership out of reach of so many of my constituents and people up and down the country. It is having a major dampening impact on people’s lives and livelihoods and on the economy in the long term. It does nothing for private renters and nothing for those in desperate need of affordable housing.

Much of the debate was given over to the new two per cent stamp duty surcharge o non-resident overseas buyers, introduced just over a month ago. Hillier did not believe it went far enough.

“Although we are seeing a two per cent uplift, it is not what was originally promised, and even that, I would say, is still not enough to prevent people from speculating, particularly in my constituency and elsewhere in London, on the expensive London housing market and overheating that housing market.”

She added: “The excuse is often that developers need the money because they cannot operate without that cash-flow model. I think they would adapt pretty quickly. In my constituency, there are blocks that local people have kept their eye on, wanting to try to buy, only to find they have already been sold en masse overseas. A stamp duty increase would help a little bit.”

Hillier also gave MPs examples of individuals she met at her constituency surgeries,  working for the NHS and living in rented accommodation with little likelihood of being able to afford to buy their own homes.

Mark Drakeford – Labour’s first minister in Wales, and now well-known throughout the UK for his role during the pandemic – says: “It’s so sad that you can be raised in a community, to feel love towards that community, and then the door gets slammed shut in your face because the houses are too expensive for you to live there.”

According to the BBC’s coverage of his visit to north Wales, he said he hoped his administration’s future plans would help young people currently unable to stay in their home towns because of property prices.

“It will be some measures to do with the way we tax property sales, there’ll be measures to do with planning – rights local authorities will be able to use. There will be things we can use to do with land transaction arrangements.”

No specific changes to tax and planning rules have been released by Drakeford, whose party performed well in recent elections in Wales.

Land Transaction Tax is the tax that replaced stamp duty in Wales, introduced under Drakeford’s administration, while Wales is the only part of the UK where local authorities have powers to charge higher levels of council tax on both long-term empty properties and second homes.

Like the stamp duty levied in England, there is an LTT holiday currently underway in Wales.

For sales completed up to June 30 people can buy a home worth up to £250,000 without paying it, after Drakeford’s government scrapped the lowest rate of 3.5 per cent for homes costing more than £180,000.

Any amount above a sale price of more than £250,000 attracts a five per cent charge with higher rates for more expensive property.

For sales completed from July 1, buyers face the return of 3.5 per cent LTT on homes between £180,000 and £250,000.

When comparing March and April listings with those of January and February, there was a jump of 51 per cent in the number of properties coming onto the market, with over 260,000 new homes coming up for sale over the past two months.

Rightmove’s property expert Tim Bannister says: “We’re hearing reports of some areas where properties are selling within a few days of being added to Rightmove, and the average time to find a buyer is the quickest we’ve ever recorded nationally.

“But we also know there are thousands of local markets and some are moving more slowly than others, so as a seller you’ll want your property being seen by the biggest group of buyers possible, giving it the best chance of selling and achieving the best price.”

Bannister’s remarks come as the portal has revealed a league table of neighbourhoods most viewed by consumers.

Top of the list of local neighbourhoods is Didsbury in Greater Manchester which is one of the most expensive areas within the county. The average asking price in Didsbury currently stands at £367,429, over £130,000 higher than the Greater Manchester average of £237,380.

Second on the list is Walthamstow in East London, where average asking prices have risen by 116 per cent over the past decade, rising from £230,888 to £499,534, and they are up by four per cent over the past year.

The only other London location in the top 10 is Chiswick, which is the only place on the list where asking prices are lower than this time last year, down by one per cent to £969,350, and down by nine per cent when compared with five years ago when they were above £1 million.

Bannister adds: “Our new analysis gives sellers in these local hotspots a clear indication of just how popular their area is, as it tracks the huge pool of the most eager prospective buyers who are signed up to find out instantly when a seller decides to bring their property to market. More buyers have realised they don’t have the luxury of waiting until the weekend to decide which properties they want to request to view, and so they’re making sure they’ve signed up to find out first when a home comes up for sale.

Paul Offley, compliance officer at The Guild of Property Professionals, says cyber criminals have found ways to exploit businesses by seeking out remote working security gaps.

“While working remotely has been an integral part of keeping people safe during the pandemic, it has also opened up opportunities for cybercriminals looking to infiltrate networks through more vulnerable IT systems” says Offley.

Earlier this week Rightmove revealed that six of its member agencies had systems hacked to alter listings on the portal. On top of that, there’s been a slew of reports from other industries to show data breaches are on the rise.

BAE Systems, Britain’s largest defence contractor, warns of a huge jump in botnet, ransomware and phishing attacks. Police forces in England, Wales and Northern Ireland recorded over 6,000 cases of Covid-related fraud and cybercrime during the pandemic. And data from Interpol revealed that ransomware incidents have increased by over a third, with phishing and fraud claims increasing by 59 per cent.

The Guild’s Paul Offley continues: “If large corporate entities and government bodies are susceptible to being hacked, how much more vulnerable are independent agents or remote workers who typically have weaker technological defences.

“With insurers inundated with cybercrime claims, there has been a substantial increase in cyber insurance premiums, along with insurers requiring more data and ensuring that stricter risk management procedures are adhere to.”

He says that aside from deposits, rents and other money collected by agents on the lettings side, there is also a significant amount of sensitive data held by all agents that should be protected.

This includes client addresses, account details, alarm records and passwords to access homes, passport details and other ID information.

“Access to this kind of information is what has made the industry a target among cybercriminals” he warns.

“Another consideration should be cyber liability insurance, which would provide some peace of mind if an incident does occur. In fact, with eight out of 10 businesses in the UK having experienced a cyber security breach in the past year, cyber liability should be more than a consideration, it is essential.”

Offley gives this advice to agents:

– Regular password updates on all devices;

– Password complexity – use different passwords for different accounts;

– Never share passwords;

– Two Factor Authentication where appropriate;

– Staff training to be aware of phishing emails and the damage they represent. One in every 3,722 emails in the UK is a phishing attempt. Around half of cyber-attacks in the UK involve phishing;

– Software updates;

– Ensure files are encrypted;

– Monitoring of mobile and home working procedures;

– Never, under any circumstances, should a payment be made to a new bank account without verbal confirmation that the account details are genuine;

– Cyber Liability Insurance.

The issues arise when buy to let owners or those with multiple properties sell homes in consecutive tax years.

Elaine Shiels of RSM says: “Buy to let investors who are reducing their portfolio and owners of other properties which will give rise to a taxable gain on sale, may make taxable disposals in consecutive tax years. Obvious perhaps, but unfortunately HMRC’s systems cannot cope with that.”

She continues: “If the taxpayer reported a 2020/21 taxable gain online, reporting a 2021/22 taxable gain will almost certainly generate an incorrect calculation. HMRC describes this as a temporary problem and advises that vendors ask for a paper return to resolve the issue.”

Shiels says a second problem connected with Capital Gains Tax and property may be more worrying still.

To illustrate it, she gives the example of a couple who sold a property in May last year.

At the time, they were unaware of their income levels for the 2019/20 tax year but took a prudent view and paid CGT at the higher rate of 28 per cent.

They completed their returns appropriately but in the event had been overly cautious and overpaid CGT while underpaying both income tax and national insurance.

Shiels says, in a blog on the RSM website: “It is now emerging that, in these circumstances, HMRC is insisting that the additional income tax and national insurance liabilities must be paid in full.

“The overpayment of CGT can only be reclaimed by submitting an amended CGT return online. This feels unjust. If HMRC recognises the CGT overpayment, why will they not allow it to be set against other liabilities? Why should HMRC be entitled to charge interest and penalties on the income tax outstanding when overpaid CGT has not been repaid?”

She continues: “The way in which HMRC’s CGT system has been designed means that – far from being digital by default – second and subsequent disposals require manual returns. What’s more, taxpayers find themselves having to overpay tax unnecessarily and then struggling to secure repayments from HMRC. This testifies to the inadequate design of the CGT system and augers very badly for the next round of [the HMRC programme called] Making Tax Digital.”

Capital Gains Tax is figuring increasingly frequently in the property market.

Earlier this month an agent contacted Estate Agent Today to issue what he called “an urgent alert” about the risk of Capital Gains Tax being levied on vendors of some properties with dedicated home offices.

And there has been long-standing worry that the recommendations of a report from the Office for Tax Simplification, calling for CGT to be raised to levels similar to income tax, could be implemented by the government to recoup money spent on Coronavirus. Nimesh Shah, chief executive of tax advisory firm Blick Rothenberg, has warned that possible changes could be coming later this year.