A Stamp Duty Free-for-All, BUY NOW!?

Well if there is one bit of good news that came out of this Covid-19 Pandemic it's the sheer amount of help displayed from the government to assist those in need. We all know by now the extent of the grants and breaks for most of those in the economy, now the housing market needs a push.

Estate agents are rejoicing in easy sales now as with the axe of stamp duty up to £500,000 it certainly means a considerable cash discount on purchasing a (next) home. Imagine not having to fork out with the £15,000 required on a £500,000 purchase price certainly makes a considerable difference! 

And for investors?

Sadly the 3% surcharge still remains... However there's still savings to be had of course, on £500,000 we are also saving that £15,000, so still less money to park in the "deal" upfront. This can only be a good thing.

Forever?

Well the key question is of course, how long will this last? At the moment details such as that remain unclear, so should we all rush to buy now? We certainly saw a big rush to complete when the surcharge came in to effect in 2016, so much so that we saw a real boom-bust scenario, artificially inflating prices even. This leads me right into my next point of discussion...

Market forces

I think investors are no different to normal folk that rush into something when they see a bargain, or the end of a sale. We saw this in March 2016 as prices really peaked and then in April they started to fall heavily (transactions fell and hence prices, because people were factoring in the extra stamp duty in their offers, effectively lowering the purchase price to compensate them. Sellers suffered short term. It picked up again of course as we got used to the "new normal" but there was certainly a stall in the market at the time, I remember it well! That, and the B..... announcement of course!

Buy now?

By now, you should realise that I'm sceptical of the current market. I feel that rushing into a deal with an aim to resell the end product could leave you stuck with it. I think that we haven't seen the full effect of the economy shrinking 20% as yet. Companies are still paying furlough wages because they can claim it back from the government. Once the handouts stop will those people still be required? The demand for the product or service their company offers may have shrunk to such an extent that the headcount can be reduced. Keep someone on or simply offer them redundancy? It will take some time to build up to the size they (the company) were before the pandemic for sure. People in the leisure and tourism industry have suffered first and foremost and we'll see more sectors follow suit for sure! So good time to buy? Not sure is my answer. I think prices are inflated currently - we're still seeing amazingly good results in auction houses and I question as to why... When probing other colleagues they think it's because money is cheap and houses are certain. They are certainly less liquid than other investments me thinks, and because of the high transaction costs relative to other forms of investment I'm wagering that people are in it for the longer term. Park the money and sit it out. A new breed of investors, simply looking for a 5% yield and being happy with that for the next decade... I'm not sure that's the way to go, and as you know I'm heavily invested in property!

Do stay tuned for property investment tips/tricks and updates and by all means do check out the DownToSouthLondon YouTube Channel for entertaining and informative videos to help you invest with confidence! I also offer coaching on a one-to-one basis so if you are looking to get into property investing and require personal guidance then head on over to www.jeroenhoppe.com.

6.8% rental yield in Clapham South

This four bedroom flat in Poynders Garden SW4 has just come onto the market with Foxtons, at an asking price of £399,950.

http://www.rightmove.co.uk/property-for-sale/property-49501853.html

Finished to a reasonable standard, with four good size double bedrooms, a large reception room, and within easy walking distance of Clapham South (Northern Line) and Balham (London Victoria), the property would make an ideal home for professional sharers. 

After studying the floorplan and noting the lack of a bathroom photograph, it seems unlikely that it includes a shower - something most sharers would consider essential. A bathroom refit should be considered if you want to make the property as attractive as possible to prospective tenants. After making minor changes a weekly rent of £525 would be achievable, offering a 6.8% yield at asking price. The recent stamp duty reform also represents a saving of £2,000 when compared to the old 'slab' system.

If you've spotted a buy-to-let opportunity or need impartial advice regarding your current property portfolio, feel free to give me a call on 020 3397 2099 or email me at jeroen@xandermatthew.com.

How will stamp duty reform affect the Clapham property market?

The big news from George Osborne's Autumn Statement was a complete overhaul of the stamp duty system. The old "slab structure" has been replaced with a sliding scale along the same lines as income tax, with different rates applying only to the portion of the property price within each band.

From today, this means:

• No stamp duty will be paid on the first £125,000
• 2% is paid on the portion up to £250,000
• 5% is paid on the portion up to £925,000
• 10% is paid on the portion up to £1,500,000
• 12% is paid on anything above that

For the majority of buyers across the UK this can only be a good thing, with stamp duty decreasing or remaining the same on all purchases below £925,000. 

But what does it mean for the property market in Clapham?

There are currently 340 properties for sale within the SW4 postcode.

Of these, 33 fall within either the 250k-300k or 500k-550k range. The reform represents good news for the sellers of these properties, as under the old system their true value was often distorted due to buyer's reluctance to offer above the thresholds, where the increased rate applied to the entire value of the property (3% at 250k and 4% at 500k). 

With many buyers struggling to raise a large enough deposit to secure a mortgage, the reduction in stamp duty from £7,800 to £3,000 on a £260,000 property will have a significant impact, with greater demand anticipated in cheaper areas such as the Solon New Road Estate and the Clapham Road Estate. First time buyers will hope to compete for properties which would usually be snapped up by buy-to-let landlords.

Clapham will, however, feel the negative effects of the reform far more than neighbouring Brixton and Stockwell. In upmarket areas such as Abbeville Village and Clapham Old Town, buyers are going to feel the pinch, and this could have a knock-on effect further down the chain.

95 properties in SW4 are on the market with asking prices in excess of £925,000. The majority of these are 4+ bedroom family homes on streets such as Cautley Avenue, Narbonne Avenue and Lillieshall Road. 40 of the 95, on streets such as The Chase and Macaulay Road, have asking prices in excess of £1,500,000. At that level, buyers are at least £18,750 worse off. It's fair to assume that in the short term at least, they may look to offset this loss by making slightly lower offers.

If you have any questions regarding the stamp duty reform, or you'd like to know how it might affect your property, give me a call on 020 3397 2099 or email me at jeroen@xandermatthew.com.

You can calculate the stamp duty on your property purchase here:
http://www.hmrc.gov.uk/tools/sdlt/land-and-property.htm