Carlisle Property Blog – News update

STAMP DUTY

HMRC needs to urgently address the lack of clarity in parts of their stamp duty guidance, which has led to unnecessary confusion for solicitors and their clients, according to Cornerstone Tax

Stamp duty – prior to the existing holiday – typically costs homebuyers in the region £13bn a year collectively, but there has been no shortage of complaints from consumers and advisers over thousands of pounds being mistakenly added onto people’s property purchases, usually by solicitors who are unsure of the rules around the levy.

It has been estimated that more than £3bn worth of stamp duty was overpaid in 2015/16 due to mistakes in advice and confusing complex rules, and yet the tax remains poorly understood.

With the existing stamp duty holiday due to end in March, the complexities of the tax are no clearer, and remain complicated, not just for homebuyers, but often the solicitors and tax advisers employed to make sense of the rules and regulations surrounding the purchase of various types of property.

Comment – It has to be worth spending a few minutes to review what you paid in stamp duty if you bought a house in 2015/16

RENTERS WANT BIGGER

There has been a notable increase in rental demand for houses as tenants rush to upsize, new research shows.

Howsy, the lettings management platform, analysed tenant demand across 22 major UK cities and found that houses are currently more sought-after as more renters generally look to get more space for their money as a growing number of people work from home.

Howsy looked at what proportion of rental properties is being snapped up by tenants and how demand differed between property types. The analysis shows that demand for houses is currently at 29% while demand for flats averages 26%.

While the current pandemic is leading this trend for more space both in the home buying and rental markets, flats are still proving more popular than houses in some cities.

Comment – Carlisle is following the trend with massive demand for bigger house, more space and gardens. Flats are proving difficult to let with low demand.

TAX INCREASES ARE COMING

The message to vendors should be to sell now before tax rates increase. Every agent in the country has dozens or even hundreds of vendors who are dithering about whether to sell their property or not. So now would be a great time to write to them or phone them. If they are selling a second home, or an investment property, you can warn them that capital gains tax rates could rise from 18% or 28% to as much as 40% or 45%. So now is a good time to sell. If they are downsizing and planning to give part of the sale proceeds to their family by way of a potentially exempt transfer, you could warn them about possible changes to the inheritance tax rules. These may well change to prevent people from giving money away in the future. It may even be worth mentioning that there have been stories in the press about the possibility of the government taxing the profit that people make when they sell their primary residence.

For landlords, most particularly those with multiple properties, you might suggest that they consider transferring their properties into a limited company in order to protect themselves against a future increase in CGT rates. Most landlords will not take action on this but they will thank you for taking the time to discuss the matter with them. Perversely, an increase in CGT rates would have the effect of locking landlords into their buy to let investments as they would be very reluctant to sell if CGT rates were to rise to 40 or 45%.

Comment – Take stock of what you’ve got and choose which direction you take wisely. Is it worth selling if you’re going to leave the money sitting in the bank with no interest growth. Might be worth taking professional advice from an accountant. Armstrong Watson can assist with expert advice on 01228 690200

PET DISCRIMINATION

An online petition calling for pets to be allowed in private rental properties has gained thousands of signatures.

The petition – on the Petition Parliament website – is from Hannah Bennett and says: “I’d like the government to prevent discrimination of tenants and potential tenants with pets, including by preventing landlords from including a ‘no pets allowed’ clause in tenancy agreements. It is completely unfair that a person and/or family can be refused accommodation based on the fact they have a pet. Most of the time people only have a small dog or cat, and it can be incredibly difficult to find accommodation as it is let alone with this clause in place.”

The petition comes as Tory MP Andrew Rosindell is promoting the Dogs and Domestic Animals Accommodation and Protection Bill in the House of Commons.

The measure – which this week has its first reading – is urging a reform of rental laws allowing dogs and other animals to be kept in rented accommodation so long as owners can demonstrate their care for them.

Comment – It’s a tricky one as there are many advantages for a landlord to allow pets such as longer tenancies, however pets can damage properties. Northwood find that a pet is only as good as it’s owner and agent’s judgement is vital.

Carlisle Property Market update

CARLISLE PROPERTY BLOG 28/09/20

House prices continue to increase as demand runs ahead of supply across the UK housing market.

The annual UK growth rate is +2.6%, up from +1% a year ago. ZOOPLA 28/09/20

The Carlisle market mirrors the national trend and in my mind is as strong as it has been in over 14 years.

37% rise in demand, year on year

Further COVID restrictions to support demand in near term. We have previously highlighted how the strength of the housing market is being driven by a once in a lifetime re-evaluation of housing in response to COVID and the lockdown. Households are prioritising space and location as well as factoring in a shift in working patterns. Less time spent meeting friends and family in public locations will re-enforce the importance of the home. We believe that a second spike in new cases and a tightening of restrictions announced by the Government will only serve to support this trend, primarily for those households in more secure financial positions. However, the housing market is not immune to any prolonged weakening in the economy and the impact of less Government support. ZOOPLA 28/09/20.

In Carlisle, 3 and 4 bedroom properties are in high demand. Prospective purchasers have internal space and good gardens high on their agenda. Fast broadband is very important to them also.

Demand from first time buyers weakens but existing home owner demand remains strong.

Reduced availability of mortgages at or over 90% LTV – as lenders meet increased demand at mid to lower LTVs – is a primary factor behind weakening demand.

Those home owners with strong equity is the strongest market.

Renters Reform Bill pushed into the long grass

It appears that the Renters Reform Bill – a key measure in the 2019 Conservative General Election manifesto – has been pushed into the long grass.

The pledge was for this Bill to include the scrapping of Section 21 eviction powers and the start of the concept of lifetime deposits transferable from one property to another when a tenant moves.

No date has been made available in Parliamentary business for the Bill to be introduced, although it was announced in the Queen’s Speech last December as being a measure that would be initiated in 2020. Letting Agent Today 25/09/20

Did the chancellor ignore the private rental sector?

There was no comfort for landlords in the chancellor’s support measures. Landlords own one or two properties and rental is often their sole source of income, make up the majority of landlords in the UK and many are facing hardship. Lack of support may mean many will exit the private rented sector which will cause enormous problems for tenants in the coming year.

If you are thinking of selling or investing in property, please feel free to get in touch for a free valuation or no obligation chat.

Best regards

Gordon

Carlisle Millennials Moving Back in with Mum & Dad?

Roll the clock back 20 years and any self-respecting late 20/early 30 something would never say on their first date that they lived with their mum and dad. It was seen as a sign of immaturity being tied to your mother’s apron strings with as a failure to leave the family home. Yet over these last two decades, the age of leaving home has been increasing steadily from 20 years and 11 months in the late 1990’s to 22 years and 7 months today.

However, as with all the stats, the devil is in the detail. Although the age of leaving home has only risen by 8% between 1997 and today, those that didn’t leave home in their early 20’s tended to stay much, much longer.

In 1997, 11.26% of 25yo to 34yo still lived at home with their parents, yet last year that had risen to 15.74%, an increase of 391,000  ‘stay at home’ Millennials

However, before we deride these Millennials for still being tied to their mother’s apron strings, I would say those very same Millennials (the mid 20’s to 30-year olds) have been pragmatic, being attracted to sacrificing independence in order to achieve their long-term life goals as they have seen rents rise and an inability to save for the mortgage deposit. All of this has seen the first-time buyer levels in this millennial age range rise for the last three years … so good news for everyone!

However, is all that about to change?

Just as mum and dads in Carlisle had thought their late 20 something/early 30 something offspring had flown the nest, Covid-19 has blown some Carlisle ‘chickadees’ back into the nest. Back in March, the lockdown saw many Millennials flee the big UK cities, with their constrained and poky shared HMO’s and flat shares, swapping their city centre private rented home for their parents’ Carlisle home.

Yet with lockdown lessening, it isn’t just remote workers who are unenthusiastic and disinclined to return to the big cities (fearful of a second lockdown) – many of these Coronavirus blow-ins are deciding to stay put too! A recent YouGov poll asked Millennials of private rented homes what their plans were and 1 in 6 tenants planned to hand their notice in on their rented home and fly back to the nest of mum and dad. The advantages are quite plain, especially as it could enable them to save for a deposit to buy their future home.

There are 34,323 households in Carlisle, made up of 12,373 single person households and 20,065 family households (the remainder being made up of shared houses etc.)

Yet how many of those Carlisle family households had non-dependent children before Covid-19?

3,177 Carlisle households have children that haven’t flown the nest

That’s 15.8% of Carlisle families whose kids are still to leave home … and it’s only going to get worse!

So, what does this mean for Carlisle homeowners and Carlisle landlords?

It will mean that Carlisle parents and their children will get to know each other better, build stronger relationships and it will enable their children, if they are wise, to save for their deposit for their first home purchase – who knows maybe in Carlisle, as working from home could become the norm.

Also, with remote working, many tenants are looking for properties with bigger gardens which could translate into greater demand for property with bigger gardens? It will also change the property needs of those Carlisle parents and potentially could mean instead of those parents moving down market, they could end up staying longer or moving up market?

Now of course these polls could be a load of hot air? What I do know is that this thing has not played out yet and only time will tell if this will make a concrete change to the way people live, rent and buy property.

These are interesting times and thank you for reading this. Do let me know your thoughts on this matter.

The 2,967 ‘Trapped Landlords’ of Carlisle

Going into lockdown in March, the Government proclaimed a ban on tenant evictions, pledging that no tenant in a private rented home, who had lost their wages due to Covid-19 would be kicked out of their private rented home until the late summer. Fast forward to August and the press were being briefed as late as Wednesday 19th August that this freeze in evictions in England and Wales would cease on the 23rd August. That was until just after 4pm Friday 21st August when Mr Jenrick, the Housing Minister, announced that the eviction ban would be extended for a further four weeks and also buy to let landlords must now give their tenants six months notice to gain possession.

Cue crocodile tears for all the 2,967 Carlisle landlords

Not so ‘snappy’ with piping your eye there. I know many Carlisle landlords became landlords between 2000 and 2009 because they preferred bricks and mortar to investing in the stock market or gilts/bonds market. All they were looking for was a small pension income to top up their meagre state pension. Not all Carlisle landlords are akin to the 21st Century Rising Damp version of Leonard Rossiter with his ‘Rigsby-esqe’ or even ‘Rach-manism’ wicked landlord ways. Official estimates suggest there are 1.8m to 2.1m landlords in the UK, the vast majority doing the right thing by their tenants, many of whom have helped their Carlisle tenants in financial trouble during Covid-19 by acquiescing to short-term rent reductions or rent-payment holidays.

Also, many Carlisle landlords have mortgages (in fact, if we added all the UK buy to let landlord’s mortgages, they would add up to £216.65 billion). The Government and the Bank of England have applied political influence on the mortgage companies to be a little more flexible and sympathetic on landlord’s mortgage interest payments, yet the mortgage interest is still adding up. The issue is, some tenants are in arrears with their rent, meaning landlords aren’t receiving their rent, which means many buy to let mortgages aren’t being paid either.

So, how many tenants are in arrears? The National Residential Landlords Association stated that just 3% of landlords recently surveyed reported tenants are in arrears. This was backed up recently when Goodlord stated…

3.72% of tenancies in the UK are in arrears, although interestingly ours stands at 5.5%

These are only slightly above the pre-Covid arrears levels, yet still a strain for the landlords involved. Also, the two-month notice period of the section 21 Notice has been extended to six months, meaning it will be March before any tenants are made to leave, even if the notice was issued now.

So, does this leave Carlisle landlords trapped?

With regard to the arrears, only 1 in 17 landlords rent their property through a limited company, meaning the rest (i.e. the vast majority) rent their property as a person, thus giving themselves unlimited personal liability should their rental portfolio fail (i.e. the mortgage company could make a claim on the landlords own assets, including their main residence, if the property was repossessed and the shortfall wasn’t made up). Also, if the building society’s and banks turn against the Government advice and are too lenient with landlords with buy to let mortgages, there could be situations where the rental properties are repossessed, meaning the tenant will be made homeless.

One thing that this does also remind me of is the 2008 Credit Crunch. There were an awful lot of Carlisle homeowners who were unable to sell their home in 2008/9, so they converted their Carlisle property into a buy to let investment. There are going to be an awful lot of Carlisle landlords who will also want to sell in the next six to nine months, yet are unable to do so until the middle of next year without having to take a hit on the value of their home. For those Carlisle landlords that can relate to that, maybe we should chat to consider your options so you can mitigate any losses?

It seems Carlisle landlords have been used to saving the Government from a PR disaster of homeless tenants on the streets at Christmas, the least we should do in the country is stop disparaging landlords and lift them up from their pariah status.

Carlisle landlords are housing 10,761 Carlisle people in private rented accommodation…

… and so it is my opinion that the contribution made by these Carlisle landlords should be recognised. My fear is always of a danger of a widening schism between the landlords and tenants. Truth be told, both need each other, and I hope the Government extend help to landlords as they have with tenants, otherwise the Government won’t have any homes to house the British people if all the landlords decide to sell up. It is especially important that the supply of private properties doesn’t drop in Carlisle going forward when you consider…

Carlisle needs an additional 2,228 private rental homes by 2029

In the meantime, the Government have bigger fish to fry sorting out the economy as a whole, so if you are a self-managing landlord or even a landlord with another agent in Carlisle, feel free to pick up the phone or make contact with me and we can discuss your options without any obligation. There is no need to feel trapped, there are options for you and it is better to consider them now, set the foundations and motions going in the right direction promptly before it becomes a bigger issue in the future.

432 Carlisle Properties Sold in Stamp Duty Holiday Bonanza -Yet be careful of the sting in the tail

On the 8th of July 2020, the Chancellor announced the first £500,000 of any property bought was exempt from Stamp Duty until 31st March 2021. This also included buy to let landlords (although they would still need to pay the additional 3% stamp duty level for second properties). Talking to many of you Carlisle homeowners, I know lots of you are bringing forward your home moving plans to take advantage of this tax cut. Also, many Carlisle portfolio landlords are looking to save paying the tax by bringing their portfolio purchases forward.  Yet how do you ensure you sell and buy your Carlisle property whilst the tax cut applies (a saving of up to £15,000 of stamp duty on your next Carlisle home?).

The biggest issue whenever you are selling your Carlisle property is the properties that you are in competition with. Plenty of Carlisle homeowners have jumped onto the stamp duty holiday bandwagon since the announcement and there are 1% more properties for sale in Carlisle than there were during lockdown. The number of properties for sale in Carlisle can split down into type…

  • Detached Carlisle homes – down 3%
  • Semi-detached Carlisle homes – no change
  • Terraced / Town houses Carlisle homes – up 4%
  • Apartments in Carlisle – up 9%

So, now you know what you are up against, what do you need to know?

The most important factor is the time issue. It currently takes on average 17 to 19 weeks between a sale price being agreed and the keys being handed over, meaning you need to have found a buyer before the end of November or early December to enable you to complete the sale by the 31st March 2021. That means you really need to have placed your property on the market by the end of September and early/mid-October at the very latest to take advantage of the stamp duty holiday. Don’t get me wrong though, you could put your Carlisle property on the market after that date, yet the price you will be able to achieve for your property could be affected.

There are 1,074 properties on the market in Carlisle, of which 432 have sales agreed on them

Talking of price, or more specifically the asking price. There is a window of opportunity for Carlisle homeowners to take advantage of this stamp duty tax cut, yet don’t let local estate agents curry favour with you by tempting you with a high initial asking price to win the right to put their for sale board outside your Carlisle home.

A Which report stated in 2017 that many estate agents routinely over inflated the asking prices of the properties they brought to market. One might ask why this is an issue for Carlisle property sellers, as surely, they can just reduce their asking price at a later date? The excellent report proved that those estate agents who on the face of it appear to be doing you some kindness by endeavouring to get more for your home with a suggested higher asking price, the property often ended up selling for much less than similar properties that were realistically priced properties from day one and also, they ultimately took longer to sell!

This Which report compared the original asking price with final selling prices for 370,000 properties to ascertain how many estate agents had reduced the initial asking price of properties in order to sell them. Which found that 70,300 (19%) of all 370,000 properties sold had to be reduced by at least 5% in order to get the property sold, whilst the other 81% (299,700) had no or very minimal reductions to get them sold.

Of the 299,700 sold properties that weren’t reduced or reduced by less than 5%, the average initial asking price was £261,000, yet they eventually sold for an average sale price of £260,000. For those 70,300 homes whose asking prices were reduced by over 5%, whilst the average listing price was £266,000, their eventual sale price was only £241,000, a loss of £20,000 each. Even worse, those properties with the heavy price reductions (5% or more) took an average of nine weeks and one day longer to sell (when compared to the other properties with no or minimal reductions).

What that means is by over inflating your initial asking price of your Carlisle home, it will cost those Carlisle homeowners an extra nine weeks to find a buyer and they will lose out on the final sale price by some considerable margin (meaning you will also probably lose out on the stamp duty holiday).

Assuming your asking is price is realistic, you aren’t out of the woods yet. Other things that will help you get the best price for your Carlisle home in the best possible time (and thus save you money with the stamp duty holiday) are…

  • Everyone searches on the portals for their next home. Photos are therefore very important (a picture speaks a thousand words). If the weather isn’t good on the day of the photoshoot, ask the agent to revisit when the sun is out (and even tell them to hold off marketing the property until those pictures are perfect) … as you only get one go at being ‘new to the market’, with all the excitement and interest that causes.
  • Employ the services of a solicitor at the same time as instructing the estate agent. Bringing together the legal paperwork of the property you are selling. By doing so, you will save weeks between the sale agreed and completion. Also, solicitors will be really busy, juggling many property transactions at the same time in the next 200+ days. Anything you can do to get a head start on others can only help your cause.
  • Kerb side appeal. Look at your property from across the road. Does the front door need painting? Could a tonne of gravel spruce up your driveway? Maybe adding some hanging baskets and planted pots will help to make a home stand out for the best reasons?

The final piece of advice I can give you is if you are planning to sell your Carlisle home, make sure your Carlisle estate agent can show you proof of similar Carlisle properties and what they actually sold for to back up their suggested asking price. If the asking price isn’t realistic, the chances are you end up losing many thousands of pounds and wasting everyone’s time. If you would like to chat about selling your Carlisle home, please do not hesitate to pick up the telephone.

Nimbyism in Carlisle is Dead – Long Live the Planning Permission Rule Changes:

How will this affect the 40,229 Carlisle Property Owners?

The 1st July 1948 heralded a new dawn in how property was built, as the Town & Country Planning Act 1947 came into force, meaning no property could be built without the say so of the local authority. Now, Boris Johnson has announced a substantial change to that, by in effect, ending planning permission.
 
The decision of what gets built (and what doesn’t) will be removed from Carlisle District Council and replaced by Westminster governed ‘Zoning Commissions’. The anticipated reform will give presumptive building rights to any piece of land outside areas of outstanding natural beauty, green belt and national parks, although in the press release there was mention of protection for the countryside.
 
Travel to Europe and its common to see out of place haphazard development of new households or commercial buildings, surrounded by open countryside … so, I hope these new regulations protect us against that.
 
The principles of the planning rule changes are a departure away from looking at each planning application as a standalone application to a ‘zone-system’ of planning. Land will be divided into three classes: 1st for growth, 2nd for protection and 3rd for renewal. Anyone applying for planning permission to develop homes, offices and shops on land zoned for growth, will automatically be granted planning permission; whilst land zoned for renewal planning permission will be granted in principle while Government officers perform checks. Local authorities have until 2024 to designate areas for the three classes and once agreed, planning departments will have little or no say over individual applications that fit the rules.
 
Interestingly, these changes come on top of new planning regulations coming into force this September which gives implied rights to demolish any office building and replace with a block of flats, and the right to build extra floors/storeys on your home.
 
The Housing Secretary has specified the motive behind the changes to the planning system is not to make planning permissions easier to get (although 88% per cent of planning applications are approved by local authority’s already). Instead, they have been done to make the planning process quicker, less expensive and less likely to be held up by special ‘interest’ groups.
 
97% of planning permissions in Carlisle District Council were approved last year (compared to the national average of 88%)

Noteworthy, the planning rules were changed in 2016 to turn disused shops and office space into residential homes (called ‘permitted development’ rights), yet these new regulations about to be announced by Boris will take that right even further.  This is important because in 2019, there were 241,340 new households created in the country, yet 29,260 of those households came from turning disused shops and office space into residential homes (i.e. the planning permission rule changes made in 2016).
My concern is that the new planning rule changes do not make shop or redundant space into the new 21st Century ghettos. An RICS report in 2018 showed a massive difference between the conversion of office blocks with planning permission and those without (i.e. permitted development). What was interesting is that only 1 in 5 properties met the national space standards, a non-legally binding suggestion on the minimum size of home, minimum dimensions of bedrooms, natural light, storage & floor to ceiling height, whilst 3 in 4 of office block conversions that did obtain planning permission met the standard.
These planning changes cannot be a charter for cowboy builders or developers, otherwise your children or grandchildren could end up renting one of these sub-standard homes, thus stealing human dignity from thousands of youngsters who will end up renting these homes.
 
So, what does this all mean to Carlisle homeowners and Carlisle landlords? If you have been reading my articles you will know that one of the most important factors holding back the Carlisle property market is the lack of new properties being constructed and when they are, the lack of infrastructure surrounding them.
 
Since 1995, only 4,653 properties have been built in CA1/2/3
 
Yet, these new planning changes will also introduce a new method of taking a lot more money off landowners and builders, as the Government will take a larger share of uplift in land value (i.e. the increase in value from farmland to building land) to finance infrastructure around the development.  This would mean new housing developments would come with upgraded roads, GP surgeries, primary schools and shops that these new communities need to be viable. Also, communities will be asked to decide on their own standards on style and design for new developments in their area, allowing residents a greater say on the development in their locality.
 
Like all things, the devil is in the detail. All of us in Carlisle cannot deny that we need to build more homes to keep up with the ever-growing population and the fact that people are living longer. This new planning system should lead to more housebuilding, which in turn would increase the supply of property for those trying to get on the property ladder. Also, in the proposed legislation is the new ‘First Homes’ scheme, which would allow key workers, first time buyers and people who live or work in the Carlisle area to purchase their new home at 30% less than its market value and when they come to sell it, that 30% discount would be passed on to the new buyer (if they also met the criteria).
 
With regard to what can be built and where, Carlisle people will have a say upfront (i.e. between now and 2024 when the zoning rules are drawn up) but once the zoning has been established, then ‘nimbyism’ will become a thing of the past and hopefully we can construct the Carlisle homes we are proud of for our children and for Carlisle generations to come. 
 
Please do let me have your thoughts on this matter.

Carlisle OAP Homeowners to Face £9,976 Coronavirus Tax Bill?

The Government is on track to borrow £400bn because of Coronavirus and that needs to be paid back at some stage. Last year alone, before Coronavirus, the Government brought in £824 billion in taxes whilst they spent £887 billion, meaning they had to borrow £63 billion. In fact, the last time taxes were higher than spending in the UK was 1998, meaning since then the country has been living beyond its means.

Interestingly, whilst these are certainly eye watering numbers (£400bn is a lot of money in anyone’s book) most people aren’t too concerned in the short term. Because interest rates are so low, the Government are able to borrow this money at 0.39 percent per annum over a 10-year period on the Gilt Markets. There are even 3-year Government gilts at a negative interest rate. This is because the UK has been considered (and still is considered to be) a monetary sanctuary/safe haven for the last 20 years because of the country’s robust credit worthiness. Cheap money – yet it still needs paying back in the years to come and that can only be funded by taxpayers.

Ultimately, the Government will have to try to balance the books and that means increasing taxation. I know many will say there is waste in the NHS and MoD procurement, but that has already been squeezed quite hard during the Credit Crunch crisis and years of austerity. Some have suggested stopping the triple lock on pensions, which costs the Exchequer £6bn a year more than if pensions had risen at pre triple lock rates, so that isn’t going to make much of a dent in the debt. Some have suggested we could enter into a second wave of austerity, like we saw from 2010, yet neither the voters nor the wage frozen public sector would accept that. That leaves tax rises as the only option for leaders who claim to take a responsible long-term view of the economy.

The Government could raise tax on spending with VAT increases, but they did that in 2011 when it rose to 20% (from 17.5%). Also, increases in VAT affect the poor more than the rich. Then they could raise it from earnings (Corporation Tax, Income Tax and National Insurance) yet it’s been proved raising these ‘earning taxes’ ends up being counter-productive to the economy, resulting in tax receipts going down (even though the tax rate went up). Both are unsatisfactory, not least because big rises end up being unfair to someone.

So, some ‘think tank’ groups have suggested that we look to unearned wealth and the equity people, especially the older generation are sitting on in their homes, to pay for Coronavirus. Whilst I am in no way promoting and advocating that idea, I thought it was a fascinating suggestion and wanted to know what that would mean for Carlisle homeowners if such a fanciful idea took hold?

OAPs in Britain sit on £1.425 trillion in housing equity in their own homes

The average length of time an OAP homeowner has been in their property, according to official figures, is 24.7 years, meaning on average, 75.8% of that equity is profit. So, if say a capital gains tax of 10% was placed on any profit, it would raise £107.84bn over the next 20 to 25 years. So, what would that mean to Carlisle OAP homeowners?

Carlisle OAP homeowners own £1.261bn worth of property

Taking into account the average length of time those homeowners have been in their Carlisle home, that is an ‘unearned’ profit of £954.46m, or £505.01m after inflation. Some ‘think tanks’ have said that should be taxed as some form of capital gains tax.

To give you an idea, if every OAP homeowner in Carlisle had to pay a 10% capital gains tax when they (or their descendants) sold their Carlisle home, that would cost them £9,976 each (or a total of £95.44m).

So, is this the answer to pay for Coronavirus? There needs to be tax reforms to protect the public finances yet is it fair to tax previous capital gains? Many people say no. Let’s not forget people buy their homes out of taxed income, then pay Stamp Duty, VAT on any improvements and inheritance tax if the property value is more than £675,000, so is it fair the Government want another slice of pie?

The older generation who bought these homes saw mortgage rates of 19% in the late 1970’s and 16%+ in the early 1990’s, meaning for every pound borrowed, they ended paying back £3 to £4 when you added up the interest. Also, let’s not forget all the money spent on keeping up on the maintenance, money that has already been taxed. The upshot will be this would stop OAP’s selling their homes because it would discourage older people from trading down to a smaller home in retirement, making it even harder for younger families to find a big enough home to live in. Also, many people use the equity in their home to pay for retirement care, so if some of that is going to keep the debts down, that means the Government will have a larger social care bill in future years.

One school of thought could be taxing future tax-free gains for ALL homeowners, although given the Tory’s dependence on the more mature middle class (homeowning) voters, this might be a step too far for the Conservatives, so some have said this will be kicked down the road for Labour to sort. Sir Keir Starmer, who appears to be quite a straight-talking and even monetarily responsible Labour leader, is certainly a lot more voter friendly to the British electorate than Corbyn.

At the 2024 General Election, he could introduce what appeared to be a smart agenda of tax increases on unearned property capital gains and as long as it was presented in a clearly defined way, maybe turning the tables on the famous Tory General Election poster from 2010, when the Tory’s mocked Gordon Brown for doubling the national debt, implying it was Labour’s fault for the increase in national debt when in fact it was the Credit Crunch that caused it.   

Starmer could soberly state Labour were the only party that could be trusted to make hard decisions to avoid burdening future generations with the £400bn ‘Tory’ coronavirus debt

One way or another, this £400bn (or £14,440.43 per household) is going to need to be paid back eventually; that means a rise in taxes. Nobody likes paying more tax – yet the truth of the matter is there is a lot of wealth tied up in property, especially with the older generation and so I suppose its introduction is inevitable in the future.

Please tell me your thoughts on the matter…

What’s Next for the Carlisle Property Market?

There is no doubt that Coronavirus will affect the Carlisle Property Market, but just how?

The ensuing economic challenges are going to impact the Carlisle (and UK) property market, yet no one knows the real answer. The newspapers eulogise different opinions, but that’s all they are – opinions and everybody’s got a different opinion. The truth of the matter is we don’t know and won’t know for another few months at least, if not more?

There have been some outstanding Government supportive measures both for tenants, landlords, home buyers and sellers (including a pause on evictions for tenants, and for landlords and homeowners, mortgage payment deferments and stamp duty reductions to make buying a home cheaper), and whilst these are only temporary, they have done their job, meaning there is a good level of activity in the Carlisle property market.

A lot of that is pent-up demand from a couple of years of uncertainty because of Brexit. Also, we had the General Election in late 2019, so there have been so many reasons for people to sit on their hands. At beginning of 2020, it was like a water hose ready to burst with the Boris Bounce in January and February. Then, just as things were beginning to get going in the Carlisle property market, we had everything freeze up for months during lockdown. Since lockdown has been lifted…

the Carlisle property market is open once again for business  and there is unquestionably some impressive activity both in the sales and rental market

So, back to the original question and where are we going? I think what we will see is a subtle change to where people want to live because of the pandemic. People working from home has shown that the need to be in the big cities has reduced and as employees have realised, they can work very efficiently from home, plus they are happier and have a better work/life balance. Their employers are also happy as they get more work out of their staff and can reduce their costly office footprint in the cities. The same goes for Carlisle tenants as they are wanting more from their rental homes. Three trends we have noticed is there is greater demand for properties with gardens, greater demand for Carlisle landlords who will accept pets (as they now can have them as they work from home) and finally, tenants willingness to pay top dollar for ‘top of the range’ properties, whilst more basic and uncared for properties without all the ‘bells and whistles’ need to go for a discount. There certainly has been a flight to quality.

Yet, what worries me is the fundamental future uncertainty in 2021 and beyond. What will things look like say in Spring 2021 when the Stamp Duty reductions are phased out? Any property sold needs to have completed by the end of March 2021 to take advantage of the tax holiday, meaning you need to have sold your Carlisle property by November 2020 at the very latest to ensure your property purchase and sale deal goes through in time (as it is taking on average up to 17 weeks between sale agreed and completion). This is where the difference between a great solicitor, brilliant estate agent and awesome mortgage broker compared to average ones will show. Good ones, when all three are working together for you, can get the sale through in 6 to 8 weeks, not the national average of 17 weeks, meaning if you are cutting it fine, you might not be able to take advantage of the tax savings in the spring. Give me a call if you want to know who the best of the best in Carlisle are to ensure you don’t lose out on those tax savings. 

The value of the average Carlisle home currently stands at £150,700

So, what is going to happen to the Carlisle property market? It really depends on the economy as a whole and of course the property market is a large part of that. I know one thing that buy to let landlords and home buyers don’t like is ambiguity and the British housing market has always lived and breathed on emotion and sentiment. People will only buy and sell property (and borrow the money to make those transactions happen) when they feel good. Are all these things like Stamp Duty holidays just putting off the inevitable? Are we heading for the mother of all property crashes?

Well, let me put sentiment and opinion aside for a second and look at the simple facts.

We have an increasing population, yet we don’t build enough houses

Since 1995, we have built on average 150,200 properties per year. The Barker Report said 2004 the country needed 240,000 per year to satisfy annual demand for new homes and whilst the number of new homes built in the UK last year rose 1% to a 13-year high, only 161,000 homes were built. That means over the last 25 years, with the difference between actual homes built and the targets set out in the Barker Report, we have an inbuilt shortage of 2,245,000 homes, meaning…

Since the Millennium, property values in Carlisle have increased by 155.2%

Other factors have contributed to that. The average age of a person leaving their parents’ home in the UK is 24.4 years and that has been dropping for a few years meaning more homes are required. People are also living longer (in 2000 the average person lived until 77.7 years and now it’s 81.1 years – doesn’t sound a lot until one considers for each additional year the average person lives in the UK, we need an additional 356,500 homes). Finally, we have got immigration. In the year ending March 2019, 612,000 people moved to the UK (immigration) and 385,000 people left the UK (emigration) – meaning a net increase of 227,000 people (or a requirement of c.100,000 homes to house them in one year alone). All those factors in themselves mean…

we have more demand for Carlisle property than we have supply and that’s not going to change any time soon

Property markets are driven (like all markets) by supply and demand so I believe Carlisle property values can only rise in the long term. The question is whether Carlisle people will have the sentiment and confidence to borrow money on a mortgage and invest in Carlisle property, yet at the moment with ultra-low interest rates, borrowing money to buy a home has never been so cheap and if you are in it for the long-term (which you should be with property) then I think it’s good news.

One piece of good news is that mortgage lenders are willing to lend up to 90 per cent loan to value mortgages for first time buyers (and in some rare cases 95 per cent), albeit with a lot of strings attached … yet this is a good sign as the banks and building societies wouldn’t be lending at these levels if they were too scared.

Investing in property, be it for yourself to live in or buy to let is a long-term game. We might see an uplift in prices in the short term because of the demand mentioned above, then again, we might see a dip in 2021 yet again for the reasons mentioned above – until we start to build new homes to the scale of 300,000+ a year (something that has never been achieved since 1969), the long-term picture appears to good. Be you a Carlisle landlord, Carlisle house seller or Carlisle buyer, you do have to be a lot more strategic and thoughtful about what you are going to do. If you would like to pick my brains, drop me a message on social media or pick up the phone.

So those are my thoughts, tell me your thoughts for the future of the Carlisle property market?

Every Carlisle Homeowner & Landlord to Receive up to £5,000 Grant for Roof Insulation & Double Glazing from September




I’ve been harping on about this for a few weeks but it’s a must have so here’s what you need to know
 
The Chancellor announced on Wednesday 8th July in his mini Budget some interesting news for Carlisle homeowners and Carlisle landlords. Rishi Sunak is going to give ‘The Green Homes Grant’ of up to £5,000 to cover two-thirds of the costs of environmentally friendly upgrades to your Carlisle property, with the homeowner covering the other third. There are also enhanced grants of £10,000 for the poorest households where 100% of the cost will be met by the Government.
 
This is nothing new mind you. The coalition Government in 2013 announced The Green Deal. That deal was in theory to have been a help for the builders, energy saving and home improvement industry, as the Government hoped many would take up environmentally friendly improvements to save energy (and ultimately greenhouse gases). Yet by the time it was brought to an end two years later only 14,000 households had applied, costing the taxpayer £238m (or £17,000 per household). That doesn’t sound good value to me – yet who am I to comment?
 
Anyway, let’s not be negative, as improving our homes makes sense – after all, research shows Brits have the draughtiest homes in Europe. A recent survey suggests UK homes “leak” heat up to three times more quickly than more energy-efficient homes on the continent.
 
Data from 80,000 smart thermostats across the EU were reviewed to measure how quickly a home at 20°C inside cooled once the heating was turned off (when the outside temperature was 0°C). Within 5 hours, the average British home dropped by 3°C, the French came in second at 2.5°C yet the Germans came in at just 1°C, meaning British homes clearly need more heating (i.e. greenhouse gases) to keep them warmer.
 
The chancellor has allotted £2bn to the scheme, which pays for two thirds of the cost of the upgrade and stated that more than 650,000 homes would be upgraded. This could save those households a total of £195m a year in heating bills (or the equivalent of £300 a year per household), cutting greenhouse gases and saving jobs in the construction industry. The grant can be applied for from September and is open to Carlisle homeowners and private sector Carlisle landlords. Applications must be made before March 2021 and the Treasury have stated about half of the fund would go to households with the lowest incomes (how low is still to be announced), with an enhanced grant of up to £10,000, saving them up to £600 per annum each on their heating bills.
 
The average Carlisle home annually produces 4.702 tonnes of CO2, compared to the national average of 4.101 tonnes

Due to the particular individual nature of the properties in Carlisle and their construction type, with suitable improvements in insulation, double glazing and draught proofing, Government statistics state that this could be reduced to 2.685 tonnes for Carlisle homes if suitable work (as per the Green Homes Grant) was carried out.
 
Why is this important? Well UK householders spend £34.735bn a year on their electric and gas bills – this is a lot of money. In fact, looking specifically at Carlisle properties …
 
Carlisle householders spend £771.98 per year on  heating their homes (compared to the national average of £669.34 per year)
 
Yet, if Carlisle householders carried out the energy improvements that ‘The Green Homes Grant’ suggests their energy bills for heating alone would reduce to £560.83 per year … quite a saving over a decade and beyond (enough to buy a decent holiday – whatever one of those is!).
 
So, with Carlisle homeowners and Carlisle landlords being able to spend the grant on loft, floor and wall insulation, low carbon gas boilers, heat pumps, double or even triple-glazed windows, energy-efficient doors and low energy lighting … everyone should win – the environment, the economy and household budgets. More details on the scheme should be released by the Government in August.
 
 
 
 
 

Carlisle Property Market – the Last 10 Years

One of my Carlisle landlords contacted me last week from Rickerby, after he had spoken to a landlord friend of his from Dalston. He told me they were deliberating the Carlisle property market and neither of them could make their mind up if it was time to either sell or buy property following Covid-19. His friend said he would wait to see what would happen to property prices following Covid-19, yet my landlord wanted to pick my brain in order to help him decide what to do.

I said the press are aware that bad news sells newspapers and the doom mongers are plying their trade on uncertainty in the world economic situation. Roll the clock back to the Credit Crunch of 2008/9, and there were quite a few landlords in Carlisle who had overexposed themselves with high percentage loan to value buy to let mortgages, backing the hope they would make their money on the capital growth, yet fell foul of a drop in rents and thus got bankrupted (but who could blame them when the property market was rising at 15% to 20% a year in the early 2000’s and banks like Northern Rock were giving mortgages out to anyone with a pulse and note from their Mum).

Thankfully the Bank of England changed the rules on all mortgages in 2014 banning self-certification mortgages, tightening the rules around interest-only mortgages and the requirement around affordability to be checked plus a tough stress test if interest rates rose. It’s obvious we are going to enter into a recession because of Covid-19, yet this time the Carlisle property market is better placed to weather the storm.

However, gone are the days when you could buy any old house in Carlisle and it would make money. Yes, in the past, anything in Carlisle that had four walls and a roof would make you money because since World War 2, property prices doubled every seven years … it was like having a free cash machine.

If a landlord bought a Carlisle terraced/town house in the summer of 2000, he or she would have seen a profit of £60,800 to its current value of £103,600, a rise of 141.9%

Nonetheless, if that landlord had bought the same property in 2010, the Carlisle landlord would have only made £7,000 profit (a 7.3% increase). Yet since 2010, the country has experienced 31.5% inflation, meaning our Carlisle landlord has seen the ‘real’ value of their Carlisle property decrease by 24.2% (i.e. 7.3% less 31.5% inflation).

And this is my point. Nobody has been complaining about the property market in the last ten years, yet landlords are still worse off in real terms. If we do see a slight dip in property prices because of Covid-19 (looking at the market at the moment I haven’t seen any indication of its slowing down from its post lockdown takeoff), but if we do, Carlisle landlords need to realise property values aren’t the only indicator of whether the property market is good or not.

The reality is, since around the early 2000’s we haven’t seen anything like the capital growth in property we have seen in the past and it’s not predicted to grow at the rates it has previously done either. So, I believe it is high time for any Carlisle landlord pondering investing in Carlisle property to stop believing the hype and do some serious research using independent investment expertise. You can still make money by buying the right Carlisle property at the right price and finding the right tenant.

Think about it, properties in real terms are 24.2% lower than a decade ago, so investing in Carlisle property is not only about capital growth, but also about the yield (the return from the rent). It’s also about having a balanced property portfolio that will match what you want from your investment – and what is a ‘balanced property portfolio’? Well we discuss such matters on the Carlisle Property Blog … if you haven’t seen the articles, then it might be worth a few minutes of your time?