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Rising house prices help boost increase tax revenue

Rising house prices help boost increase tax revenue

Rising house prices help boost increase tax revenue

Rising house prices boosted HMRC’s coffers during the previous tax year.

Analysts suggest the booming housing market has meant HMRC has attracted more funds from stamp duty payments as well as more grimly from increased inheritance tax receipts during the pandemic.

The latest HMRC data for April 2021 to March 2022 shows total provisional tax receipts for the period rose by £133,8bn to £718.2bn – up 22.9%.

Stamp duty receipts hit an all-time hight of £18.6bn, up £6.1bn on a year before.

Inheritance tax receipts for April 2021 to March 2022 were £6.1bn, which is £0.7bn higher than in the same period a year earlier.

Other receipts included money from PAYE Income Tax and national insurance, which rose by £34.8bn to £338bn.

Rosie Hooper, chartered financial planner at Quilter ,warns that more estates are being dragged into paying inheritance tax due to the frozen threshold of £325,000 after which an estate may have to pay the levy.

She says: “A key contributor to the increase in IHT receipts is the housing market which increased relentlessly over the same period, in which stamp duty holidays drove the UK to a record high average house price.

“With thresholds frozen, the increase in IHT revenue is viewed as a stealth tax, as more and more people are dragged into the IHT net following the sale of their homes.

“This tax year, you can pass on £175,000 of your property tax-free through the residential nil rate band (RNRB) which is effectively doubled to £350,000 when combined with the allowance of your spouse or civil partner.

“That’s layered on top of your inheritance tax allowance – or nil rate band – of £325,000, meaning it is possible to pass on £1m inheritance free as a couple. However, the RNRB only works for those with direct descendants to inherit the family home, while the UK’s 6m cohabitees are less fortunate and cannot claim the combined allowances.”

Helen Morrissey, senior pensions and retirement analyst at Hargreaves Lansdown, says the IHT receipts are a “heart-breaking reminder of the pandemic” but also questions how long the booming housing market and tax take will last.

She adds: “As we emerge from the pandemic, we face difficult times ahead as the cost of living starts to bite.

“The property market has thrived in the past year as buyers took advantage of stamp duty holidays to bag themselves a new home.

“But with costs on the rise, it’s uncertain how long the market can sustain this momentum and we could see a quieter year ahead.

“Workers will also be bracing themselves for the 1.25 percentage point rise in national insurance which began in April – a further cost increase impacting already squeezed budgets.”

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Best ever spring market for vendors as prices hit new record

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There’s been a remarkable 1.7 per cent increase in the average asking price of homes coming to the market in just one month, according to Rightmove.

The national average is now £354,564 after the largest March increase for 18 years; in addition, the annual price growth rate of 10.4 per cent is the highest that Rightmove has recorded in any month since June 2014.

“This unprecedented price level is being stoked by the greatest imbalance between buyer demand and the number of properties available for sale that we have ever measured at this time of year. This is the strongest spring sellers’ market that we have ever seen in several metrics” says the portal in its latest snapshot, published this morning.

There are now more than twice as many buyers as sellers active in the market, which is the biggest mismatch between supply and demand that Rightmove has ever recorded at this time of year.

The speed of the market is further demonstrated by the fact that are there more than one in five deals being agreed on Rightmove within the first week of being marketed. This is double the figure for the same period in the more normal market of 2019.

Almost half are having a sale agreed within the first fortnight, another indicator of high demand and the likelihood of finding a buyer quickly.

“While these unprecedented numbers are helping to drive prices to new records, they do also show that there are a number of properties that will remain on the market after this time and that may benefit from a price reduction” cautions the portal.

 The largest monthly price rise has been recorded in the “top of the ladder” sector, predominantly comprising four bedroom or more properties.

This has seen a 3.8 per cent jump due to high demand and the greatest scarcity of supply, though encouragingly for prospective buyers in this sector 12 per cent more properties have come to market in the last month compared to the same period a year ago.

However it’s the more mass-market “second-stepper” sector that’s selling fastest, with just over half of these homes finding a buyer within the first two weeks of marketing.

Rightmove property data director Tim Bannister says: “Those who weren’t ready to take advantage of last year’s rush now have another chance to get on the market while these conditions last. Many of those who are selling in this record-breaking market obviously also face the prospect of buying again in the same market, and being in fierce competition against other buyers.

“Having a buyer for your own property, subject to contract, puts those who are buying again in a powerful position compared to buyers who have yet to sell, and agents report that these ‘power buyers’ are more likely to get the property that they want and negotiate the best deal on price.”

Bannister continues: “Agents report that despite the current high demand, a price reduction is often needed if a property has not found a buyer within the first two weeks.

“It could be that the property is too niche and has to wait for the right buyer with those specific requirements to come along, but more often it’s due to prospective buyers being underwhelmed by a seller looking for an over-optimistic asking price compared to other properties that are being snapped up at record speed. Acting quickly on a price reduction before the property goes stale can help to get sellers back on track for a speedier sale.”

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Demand for London flats soars as more seek to buy first property

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Flats are once again trendy as first-time buyers look to smaller homes in a bid to buy in the capital.

London flats are back in fashion after falling hugely out of favour during the pandemic “race for space”.

The release of pent-up demand from first-time buyers who put off buying decisions during Covid lockdowns, combined with spiralling rents as London fills up again with workers, has sent demand for smaller homes soaring.

According to one survey, flat prices are outpacing the overall property market in five London boroughs — Barking and Dagenham, Greenwich, Newham, Hackney and Tower Hamlets — in a striking reversal of the trend of the last two years.

In eight other boroughs — Wandsworth, Lambeth, Southwark, Waltham Forest, Lewisham, Islington, Hammersmith and Fulham and Westminster — flat price rises have almost caught up with the overall market.

 “London is on manoeuvres once again. There’s been no exodus. In fact, many younger buyers chose to rent while the dust settled on the pandemic, and that’s the main reason why the lettings market has been red hot.

“These buyers, who put their purchases on hold, are being confronted by the reality that borrowing costs are going up. Many of them are first-time buyers who are desperately playing catch-up. We expect the prices of flats in London to put in a robust performance in 2022 for this reason.”

Flats without outside space became increasingly hard to sell during the pandemic as buyers sought larger homes with gardens.

In the year to September prices of London flats only inched forward 0.74 per cent on average, compared with a 4.92 per cent rise for terrace houses, 7.33 per cent for semi-detached homes, and 9.18 per cent for detached houses.

However, Rightmove says it has seen the same marked flip-flop in the trend over recent months. It has seen a bigger increase in demand for flats — 27 per cent last month compared with last year — than for any other property.

Rightmove’s Tim Bannister said: “This coincides with the renewed demand to live in London, after it temporarily dropped due to restrictions this time last year.”


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Rightmove pushing reluctant sellers to come to market within weeks


The number one portal is making a big marketing and research push to get reluctant owners to put up the For Sale boards next month.

It says its own research shows that March is the strongest month of the year to sell a home, having the highest number of buyer enquiries per property for sale on average over the last five years.

While new listings are also highest in March, strong demand from buyers in the month means March sees the highest competition for the homes available on average.

It says data currently suggests a build up of momentum as March nears: for example listings are up 11 per cent in the last three weeks compared to the same period last year, while buyer demand is up 32 per cent over the last three weeks compared to the same time last year.

Home-valuation requests to estate agents are up 27 per cent since the start of the year compared to the start of last year, while searches for gardens have jumped 70 per cent in two years, as more people continue to look for outdoor space.

Tim Bannister, Rightmove’s director of property data, comments: “For any sellers who might be conscious of coming to market at a time when the number of new listings has traditionally been high, the data shows us that the level of demand in March means sellers are likely to met with multiple potential buyers competing for their home.

“Those thinking of selling are also likely to be aiming to buy a new property, and may be tempted to begin the search for their new home before listing their current one on the market.

“Due to the speed and competitiveness of the market, agents are reporting that it continues to be of high importance for those actively looking to become ‘power buyers’, to give themselves the best chance of securing their dream home.

“This means making sure they have their current property on the market or preferably sold subject to contract before beginning the search for their next home.

“This spring is certainly shaping up to be a busy one, with buyer demand, new listings coming to market for sale, and valuation requests to estate agents from future sellers all continuing to increase compared to last year.”

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Inflation wiping out house price growth in many areas – claim

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Soaring inflation means that house price growth in much of the country is being wiped out, according to a leading housing market analysis.

The latest monthly market report from the Home website says that only four English regions, plus Wales, show annual growth over and above the latest RPI inflation figure of 7.7 per cent for November.

Home also warns that with RPI inflation – according to some analysts – heading for 10 per cent, “some regions are treading water while others are suffering significant price falls in real terms.”

The website cautions that with cannier buyers fixing seven year mortgage deals at as low a rate as two per cent, there are hedges against the growing inflation threat – so it is not expecting any significant impact on the number of buyers in the housing market in 2022.

Home also quantifies the large gap between supply and demand.

It says agents’ inventories over the past 12 months have dropped 41 per cent – and actually 50 per cent less than in January 2019.

Supply in London is down 33 per cent year-on-year, sales stock is down 25% and prices are already up 1.3% over the last six months, making it one of the top four performing English regions.

Monthly supply of new sales listings remains comparatively low across the UK, down 18 per cent compared to the month of December 2020. Greater London shows the greatest contraction again this month.

Scarcity is also prevalent in the rental market and Home warns that it’s getting worse – the supply of rental properties is down 24 per cent on January 2021, making further rent hikes inevitable this year.

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Revealed – what customers REALLY think of estate agents

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A new survey of people who have sold their home in the past six months has given a strong backing to the performance of their estate agents – with a few exceptions.

Some 1,159 owners who moved in the past six months were questioned in early January, and asked to rate their agent from 1 (top ) to 10 (bottom).

Over 50 per cent of respondents were within the top five scores, 15% rated their estate agent’s performance during their last sale as a five – the most prominent individual score. Exactly 30 per cent gave their agent one of the top three scores.

However, at the other end of the scale, eight per cent stated that they thought their agent’s performance was terrible.

When it came to the asking price achieved, buyers reflected roughly the split seen in wider market snapshots – 47 per cent said their agent didn’t achieve the asking price agreed, but 39 per cent did get the asking price and 14 per cent said they got above asking.

When requesting feedback on areas of improvement, the respondents listed:

– More proactive during the transaction in order to speed up the process;

– Better or more frequent communication;

– Better customer service in general;

– More information on how their sale was progressing;

– A higher percentage of asking price achieved;

– Better quality of property listing and/or photos of their home;

– More help on what was needed from the agent to progress the sale.

The survey was commissioned by online agency Nested, from which a spokeswoman says: “It’s clear that sellers view the added value of an estate agent above and beyond the price they achieve and constant, clear communication and a proactive approach to selling are some of the key areas they value most.

“This is hardly surprising given the fact that it takes an average of 320 days to sell a home and the vast majority of this time is spent progressing the sale to completion once an offer is accepted, during which time it’s still susceptible to falling through.”

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Tax clampdown on second homes announced by government

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Owners of second homes who abuse a tax loophole by claiming their often-empty properties are holiday lets will be forced to pay under new measures announced by the government today.

The Department of Levelling Up, Housing and Communities says the changes will target people who take advantage of the system “to avoid paying their fair share” towards local services in popular destinations such as Cornwall, Devon, the Lake District, Suffolk, West Sussex and the Isles of Scilly.

Currently, owners of second homes in England can avoid paying council tax and access small business rates relief by declaring an intention to let the property out to holidaymakers.

However, concerns have been raised that many never actually let their homes and leave them empty and are therefore unfairly benefiting from the tax break.

Following a consultation, the government says it will now bring changes to the tax system, which will mean second homeowners must pay council tax if they are not genuine holiday lets.

From April 2023, second homeowners will have to prove holiday lets are being rented out for a minimum of 70 days a year to access small business rates relief, where they meet the criteria.

Holiday let owners will have to provide evidence such as the website or brochure used to advertise the property, letting details and receipts.

Properties will also have to be available to be rented out for 140 days a year to qualify for this relief.

Housing Secretary Michael Gove says: “The government backs small businesses, including responsible short-term letting, which attracts tourists and brings significant investment to local communities.

“However, we will not stand by and allow people in privileged positions to abuse the system by unfairly claiming tax relief and leaving local people counting the cost.

“The action we are taking will create a fairer system, ensuring that second homeowners are contributing their share to the local services they benefit from.”

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Property Wealth Tax proposed by former agency boss

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A wealth tax on overseas owners of UK homes could raise £5 billion a year to help local people buy their first properties at reduced rates, a former estate agency chief has suggested.

Kevin Hollinrake – a former chairman of Hunters estate agency chain prior to its acquisition by The Property Franchise Group – is now Conservative MP for Thirsk and Malden.

He told a debate in the House of Commons that the government had to strike a balance between personal freedom to buy homes wherever an individual wanted, with the broader freedom of local people to afford homes in their own areas.

One suggestion he had was to increase taxes on non-resident purchases of additional homes, whether holiday properties or buy to lets or occasional residences.

He told MPs: “I do not think there is any argument for not taxing those people pretty heavily if they own property in the UK and are non-resident.

“We already have a two per cent surcharge, on top of the per cent surcharge, for overseas owners. These people are having a profound effect on some house prices in urban areas as well as rural areas.

“I think 28 per cent of properties sold above £2m are bought by overseas owners. Around 20 per cent of all properties in London—and probably a decent quantity in York and other cities—are owned by overseas residents. I do not see a reason why we would not seek to tax those people even more heavily than with a 100 per cent increase in council tax.”

Hollinrake went on to say that a one per cent wealth tax on UK properties —bought by non-UK residents – would raise up to £5 billion a year.

“There would still be an incentive for those people to invest their money in the UK, which I am not against, but the reality is that this would make it a fair and level playing field. They would still benefit from the very high house price growth.

“As we have heard today, house prices have been rising by around 10%, so it still makes sense for people to invest, but such a tax would mean that we could take a little bit out of the money they are making every year from house price inflation and put it elsewhere.”

The former agency chief said the revenue from such a property-related wealth tax could go into the government’s First Homes programme, which offers new-build discounted properties to local first time buyers.

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No Impact: interest rate change not hurting housing market

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The Bank of England has raised interest rates for the first time in more than three years, in response to surging price rises.

Most analysts believe the increase – to 0.25 per cent from 0.1 per cent- will make negligible difference to the housing market.

The decision by the Bank of England will add just over £15 to the typical monthly repayment for a tracker mortgage customer. A standard variable rate mortgage-holder is likely to pay nearly £10 extra a month.

Around 50 per cent of all homes are owned outright anyway, with no mortgage owed on them, and of the rest around three quarters have fixed rate mortgage deals, meaning their repayments won’t change until their current deal ends.

The remaining two million owners are on standard variable rate mortgages or tracker mortgages so their repayments will go up as individual mortgage lenders increase their rates in response to the Bank of England announcement.

Cory Askew, head of sales at Chestertons, says: “We expect the Bank of England’s decision to increase the interest rate to 0.25% to have very limited impact on property buyers and existing homeowners. Further indicating that buyer demand remains strong, is the fact that we have seen no seasonal slowdown this year.”

Simon Gammon of Knight Frank adds: “By raising the base rate it’s clear that the Bank of England believes the economy will shrug off most of the effects of Omicron. Getting a grip on rising inflation appears to be the number one priority.

“Mortgage rates on the high street have been edging upwards during recent weeks in anticipation of this moment and it’s clear the lenders believe there could be at least one more hike in the base rate next year.”

“This rate rise may not be significant but it is a clear statement of intent” says Vanessa Hale, head of insights and residential research at Strutt & Parker.

“The rise has been a long time coming, and with inflation now at decade high levels, there really is little alternative. The rate rise has been priced in to mortgages, and with fixed mortgages making up around 80% of the current market, the housing sector is unlikely to be impacted too dramatically.

“The reality is that demand for housing continues to outstrip supply which will sustain prices for 2022. But with the cost of living continuing to rise, this could have an impact on the housing market for the medium term.”

Eleanor Bateman, policy officer at Propertymark, comments: “The increase in base rate to 0.25 per cent is a small and necessary step and one that most had anticipated for some time.

“Mortgage rates have been creeping up over the past few months, and while those on variable rates will see payments increase, the cost of borrowing remains low relative to historic levels.

“Though, traditionally, the winter months see a decline in activity, our housing market report shows sustained demand with average sales agreed maintained to the end of October.

“With indications that lifestyle factors are continuing to prompt many into making a move, we do not expect the announcement to have a significant, negative impact on the market.”

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Green Mortgages linked to EPC ratings set to soar in number

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Around a quarter of mortgage lenders currently have ‘green’ products promoting improved EPCs – and the vast majority of the rest say similar mortgages are on their way.

The Mortgage Advice Bureau tested 64 major lenders – some 25 per cent currently offer green or net zero mortgages, and of the others 88 per cent say they have plans to do so.

MAB also sought to uncover how many consumers are being offered green mortgages. Of those who have either bought a property or remortgaged in the past 18 months, just 14 per cent had been offered a green mortgage product.

Research amongst borrowers has found that 69 per cent of respondents have not heard of a green mortgage, despite it potentially reducing monthly mortgage payments based on how eco-friendly their property might be.

When asked if they would pay more for a green mortgage, knowing they would be helping with sustainability and the environment, nearly two in five (38 per cent) said they would.

Two in five said they would not pay more for a green mortgage, even knowing it would help the environment. Delving into the reasons why, 24 per cent said they can’t afford to pay any more, 20 per cent don’t want to have to pay any more for their mortgage, and 12 per cent said they already pay enough.

A further 16 per cent said they shouldn’t have to pay more to help the environment and 13 per cent said they don’t know how it will help.

Ben Thompson, deputy chief executive officer at Mortgage Advice Bureau, comments: “Green mortgages are a well-intended product, but they’re only scratching the surface in terms of helping to make the housing market more energy efficient. Existing borrowers, homeowners, and landlords who have properties below a C rating are encouraged to invest their own money to make their homes more efficient and less polluting. However, grants and incentives being offered by government is comparable to a drop in the ocean.

“Retrofitting a property could cost thousands of pounds which most homeowners may not have at hand to call upon. They’re therefore reliant on potentially borrowing against their property, which is where issues bubble to the surface.

“We welcome recent moves by lenders to look more favourably upon borrowers’ affordability based on them buying more energy efficient homes. This makes good sense and we’d like to see more of this positive action.

“However, we need combined industry thinking and innovation to work out how best and who best can influence those properties not meeting A, B, or C ratings to make sure the challenge is being properly tackled. Only then will the real benefits start to be felt.”