Category: News

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.

Starberry’s chief executive Ben Sellers says this near five-fold increase represents a shift of spending by agents away from portals and towards their own websites and lead generation.

“The Covid-19 pandemic has forced the property industry to evolve and relook how and where they spend their marketing budget. In today’s environment, a business’s digital footprint has become increasingly more important, and we have seen the shift in estate agents putting more focus into growing their own online presence so that they are not as reliant on the portals for digital leads” he says.

“As the new shop window, agents are spending more on their own websites, ensuring that they are optimising their lead capturing, lead generation and lead nurturing tools. We are also seeing agents increase their spend on their communication channels and digital marketing campaigns.”

He adds that while the majority of agents had some digital presence in the past, it was not the prime focus it has become today.

“We have been in the digital sector for several decades and have always had to convince agents about the digital transformation we believed was coming, however, now we are inundated with agents who are realising the potential of their own websites and how leads generated from their own digital channels are actually better quality and cost less than portals,”

Sellers comments: “Because agents were not focused on their own digital presence, they were heavily reliant on portals to generate leads.

“However, agents can achieve phenomenal results that rival those of the portals from their own websites via digital marketing and connecting their social media channels, email, chat and portal leads together in conjunction with their CRMs, to achieve a serious marketing ROI and true lead attribution.”

London Central Portfolio has analysed data from HM Land Registry and has revealed that only 2,936 transactions took place in PCL throughout 2020. That’s fewer than 60 a week on average.

Within PCL – which comprises the City of Westminster and the borough of Kensington & Chelsea – there are 213,000 homes.

The 2020 transaction rate was 42 per cent below the 10-year average and 75 per cent below the peak year, back in 1999 when there were 11,660 transactions.

On the basis of the 2020 data, London Central Portfolio says the typical property in Prime Central London would now change hands only once every 73 years – whereas in Greater London, it’s every 29 years.

Andrew Weir, chief executive of London Central Portfolio, comments: “PCL did not benefit from the price growth experienced by the broader UK housing market during the pandemic. The low transaction volumes demonstrate that real estate in this market is ‘tightly held’ and properties are not listed for sale during times of price suppression, which effectively creates a bottom line for property prices.

“Sellers have been reluctant to place their property on the open market due to a lack of international investors resulting in volumes falling beyond the previous low levels witnessed in the immediate aftermath of the global financial crisis and the years following the EU referendum.

“The latest data also suggests that the stamp duty holiday has had a limited impact on the PCL market and has been more of a ‘nice-to-have’ than a driving factor.”

He says the sector’s fortunes should improve with the easing of lockdown restrictions and a successful vaccine roll out.

“We expect to see the return of some Londoners who look to re-establish their city life. The current lack of overseas buyers presents a short window of opportunity for the domestic market” comments Weir.

The agent – from the London area – wants to remain anonymous but has recently been involved in the sale of a property which included in its online and brochure details, a reference to a dedicated home office.

“This property owner modified a large garden shed to become a sophisticated and comfortable home office, fully equipped for any professional wanting to work from home on either a temporary or permanent basis” the agent told EAT.

“Because working from home, at least as we now know it, has been rare in the past, the details were very explicit. But this ended up with tax office enquiries to the seller about applying Capital Gains Tax on that proportion of the property used for work purposes, rather than purely residential” the agent continued.

The risk of CGT applying to elements of some sales have been raised at different times over the past 15 months as the working from home phenomenon gained momentum during successive lockdowns.

The potential risk to sellers surrounds so-called Principal Private Residence relief, or PPR, and the 1992 Taxation Of Chargeable Gains Act.

Section 224 of the Act states that areas of a private home ”used exclusively for the purpose of a trade or business, or of a profession or vocation” may be denied the PPR relief.

Withers Worldwide, a law firm specialising in business, says on its website: “HMRC apportion any gain on a disposal between the part of the home which does qualify for PPR and the part which does not and only the gain apportioned to the part that is not used exclusively for the trade, business, profession or vocation will benefit from the relief.”

This was the issue at the heart of the concern voiced by the agent contacting EAT.

Last year advice posted on the website of respected financial consultancy RSM stated that HMRC had seen an increase in claims for tax allowances for some household expenditure – on heating, lighting and some basic equipment, for example – as more people conducted their employed work from home.

The advice stated: “What is less well known however is that such claims could lead to awkward questions from HMRC in the future when the house is sold. These could prove very costly.”

It went on to say: “Ordinarily, when an individual sells their main home, this benefits from relief from CGT and no tax is due to HMRC, even if the property has risen quite significantly in value. However, this relief can be restricted and some of the increased value of an individual’s home can be taxable where a particular room in the house is designated solely for business use and is not used personally in any way. This should be considered in any future plans for a dream study.”

The advice suggested the issue could be avoided by having a clear dual purpose for the room – for example, exercise equipment or activities for the whole family in the same room. It concluded: “For those watching the news and admiring the interviewee’s home office set up, bear in mind that they might ultimately be worse off for it and the multipurpose box room might have its own benefits after all.“

The London agent who contacted EAT maintained confidentiality on the outcome of the HMRC enquiry about the vendor’s property in that particular case, but wanted to remind the wider agency industry about the risk of explicit references to single-purpose home offices, especially at a time of relatively rapidly-rising house values and a busy housing market.

An analysis of the portal’s figures by estate agency Knight Frank shows that the shortage is a problem facing the house rather than the flat market.

The number of houses listed for sale was 33 per cent lower over the 12-month period while the number of flats was seven per cent higher.

It is also more acute in parts of the country that have experienced stronger demand due to successive lockdowns. Among the house listings, the number was three per cent down in London compared to a drop of 42 per cent in south-west England.

Knight Frank says part of the explanation relates to January and February which were marked by uncertainty over new Covid variants and the vaccination programme being in its early stages. On top of that, many parents were home-schooling.

Combined, this meant new sellers were reluctant to list their property and we are seeing the effects of that now.

When demand escalated sharply in March, supported by the original stamp duty deadline at the end of the month, the best properties sold relatively quickly.

As those properties went under offer, sellers hesitated as they were unable to find anywhere to move into themselves, exacerbating the supply shortage and putting upwards pressure on prices.

“The current supply shortage represents a bumpy exit from the pandemic and tells us very little about how the property market is going to perform over the next 12 months” says Tom Bill, head of UK residential research at Knight Frank. “The last year has shown the importance of looking beyond short-term distortions in the property market.”

But that imbalance will correct itself in the near future, Bill insists, because in March this year the number of appraisals was above the level seen in January 2020 for the first time in six months – eventually, many of those will make it to the market.

Mortgage borrowing in March rose by a net £11.8 billion pounds, the strongest since BoE records began in April 1993.

Lenders approved 82,735 mortgages in March – some 5,000 fewer than in February – but the March 2021 figure was 45 per cent up on March 2020.

Reaction from the industry has been swift and supportive.

“I expect we will see a robust rebound in mortgage approvals in April fuelled by both the vaccine rollout and extended stamp duty holiday which encouraged more homebuyers to come out of hiding and start house hunting” says Twindig PropTech chief Anthony Codling.

Jeremy Leaf, north London estate agent and a former RICS residential chairman, comments: “Mortgage approvals are always a good indicator of future direction of travel for the market. And although these numbers are a little lower than the previous month, they reinforce what we have been seeing on the ground – buyers are determined to move even though many know the log jam in the system will mean they won’t be able to take advantage of the stamp duty concession before the tapering begins at the end of June.

“Looking forward, we don’t expect much to change although prices will probably soften rather than correct as more people’s requirements are satisfied and balance between supply and demand returns.”

David Ross, Hometrack’s managing director, adds: “Our figures show that April is set to outperform March, signalling further activity to come for lenders.

“Our data shows £150 billion of property transactions were completed in the first 15 weeks of 2021. Running 10 weeks ahead of a typical year, this level wouldn’t normally be achieved until the end of June. At the same time, one in every 50 homes was sold between January 1 and April 15, up from one in every 100 during the same period last year.”