2013 housing market winners and losers
Thanks to the Funding for Lending and Help to Buy schemes, first-time buyer numbers are up by a third and mortgage lending is back to levels not seen since before the credit crunch, according to the Council of Mortgage Lenders.There has also been an 80% increase in high loan-to-value (LTV) lending, compared to last year.
But, aside from first-timers, who have been the winners and losers in the property market this year? Here's what the experts think.
Jonathan Monjack, chief executive of property management company The Happy Tenant Company: "Buy-to-let investors are one of 2013's property market winners. Average rents in England have reached their highest recorded at £757 per month, with London rents also reaching their highest at £1,141.
Furthermore, investors have enjoyed strong capital growth in London and capital growth is now spreading to other areas of the country - albeit at a lower rate."
David Hollingworth, spokesperson for London & Country Mortgages: "The market has been transformed since the end of 2012 and especially through 2013, thanks to the Funding for Lending Scheme. More high LTV deals are available and that's really freed up the market.
"There's more competition and products to choose from. Remortgage deals have improved and people are saving money by switching to these better deals. It's not just first-timers who have had a good year."
SELLERS IN LONDON
Nick Hopkinson, director of property company PPR Estates: "Property sellers in London have been the big winners, benefiting from achieving previously unimaginable prices over the past few months.
"Buyers in London are increasingly valuing on the hope that price rises will continue for the foreseeable future however anyone buying at current racy values in London is gambling that the politically proposed mansion tax, wealth and inheritance tax ideas on foreign buyers will not be implemented anytime soon to pop the bubble."
David Carlisle, PR manager of Property Network: "Foxtons decided to float on the stockmarket. The stock was floated at 230p in an initial public offering (IPO) that gave Foxtons a market capitalisation of £649 million. Foxtons used £55 million raised by the primary IPO to help pay down its debt. The rest went to its owners, directors and staff - that's a lot of money."
David Carlisle of Property Network: "In a very cynical way, I see the government as a winner. It has introduced a scheme that could have a positive effect on its ratings and the ability for young people to get on the housing ladder. It's also a winner in the sense that it probably won't be around to see the repercussions in a few years' time when interest rates have gone up, people have to start paying back a loan as well as a mortgage and nobody can afford to pay their bills."
David Hannah, Cornerstone Tax Advisors: "In a year when property tax has been high on the agenda, one of the biggest winners of 2013 has to be HMRC. Despite sales of property being almost 50% lower than in the boom of 2007/8, HMRC stands to make the same in stamp duty – £6.7 billion – this year, as it did then.
"We are getting to the point where both the public and the industry is saying enough is enough and making a stand against increasing property taxes, with many calling for an overhaul of stamp duty land tax and a reduction in the taxes imposed on buying a house. Hopefully, next year will be the year the industry fights back and makes things fairer for everyone."
So who's lost out?
Nick Hopkinson: "Anyone not on the housing ladder is currently seeing any aspirations to do so move further out of reach as time passes. Price rises and massive competition for the limited Help to Buy money are the main factors.
Also, developers with projects likely to extend beyond the next election, in fact, anyone planning/ budgeting to sell their property after the next election is likely to be a loser as a toxic mix of a new Labour government, Help to Buy ending, increased interest rates and reduced business confidence could well cause another major housing downturn at that point."
David Hollingworth agrees. "It doesn't matter how much mortgage rates have fallen by if you can't save enough for a deposit."
A way of valuing a company by the total value of its issued shares and calculated by multiplying the number of shares in issues by the market price. This means the market capitalisation fluctuates continually as the value of the shares change in the market. For example, HSBC has 17.82bn shares in issue at a price of 646.2p making a market capitalisation of £115.15bn.
A hugely unpopular tax paid on property and share purchases. Stamp duty on property is levied at 1% for purchases over £125,000 (£250,000 for first-time buyers) which then moves up at a tiered rate. For property between £125k and £250k you pay 1%, then 3% from £250k up to £500k and then 4% from £500k to £1m and then 5% for properties over £1m. But unlike income tax, which is “tiered” and different rates kick in at different levels, stamp duty is a “slab” tax where you pay the rate on the whole purchase price of the property. On shares, stamp duty is charged at a flat rate of 0.5% on all share purchases. Figures correct as of May 2011.
The tax levied on the total value of your estate after you die. IHT has to be paid by the beneficiaries of your estate before they can receive any of the money from it. The money can’t be taken from the value of the estate _– it has to be paid before any money can be released. There is an IHT threshold – known as the “nil-rate band” – below which no tax is levied (£325,000 in 2011/12). Any amount above the nil-rate band is subject to tax at 40%. If your estate totals £600,000, there is no tax on the first £325,000; however your estate will pay 40% tax on the remaining £275,000, a total of £110,000. Prudent tax planning can reduce your IHT liability, so always consult a specialist solicitor.
An Initial Public Offering is the US equivalent of flotation, and is the first sale of equity in a private company in the form of shares (know as stocks in the US) to the public in order to raise capital to finance growth.
Everything you own: all your assets (property, cars, investments, savings, insurance payouts, artwork, furniture etc) minus any liabilities (debts, current bills, payments still owed on assets like cars and houses, credit card balances and other outstanding loans). When you’re alive this is called your wealth; when you’re dead, it becomes your estate.
The catch-all term applied to investors who buy properties with the sole intention of letting them to tenants rather than living in them themselves, with the proceeds from the let usually used for the repayment of the mortgage. Buy-to-let investors have to take out specialised mortgages that carry higher interest rates and require a much bigger deposit than a standard mortgage. Other expenditure can include legal fees, income tax (on the rental profits you make), capital gains tax (if you sell the property) and “void” periods when the property is unlet.