Local W4 market information for homeowners, Landlords & Investors.

Month: December 2016

£29m paid in Stamp Duty by Chiswick Residents

“A pound saved is worth two pounds earned . . . after taxes” is what my dad used to say and it is tax I want to talk about today, in particular, property taxation .. Stamp Duty in fact.

 

Apart from some minor exemptions, Stamp Duty is paid by anyone buying a property over £125,000 in the UK. It presently raises £10.68bn a year for the HM Treasury (interesting when compared with £27.6bn in fuel duty, £10.69bn in alcohol duty and £9.48bn in tobacco duty).

 

In the latest set of data from HMRC, in the MP constituency that covers Chiswick, property buyers paid £29m stamp duty in one year alone – a lot of money in anyone’s eyes (although not as much as the £698m in income tax that all of us in the same area paid last year).

 

However, as you may know, George Osborne introduced an additional tax for landlords and from 1st April 2016 they had to pay an additional 3% stamp duty surcharge on top of the normal stamp duty rate when purchasing a buy to let property. There were tales of woe and Armageddon with a report by Deutsche Bank suggesting that the new surcharge could see house prices fall by as much as 20%.

 

HMRC data released in the Summer for Quarter 2 (Q2) of 2016 did seem to back up those fears as they published some worrying figures; only one in seven properties purchased was a second home or buy-to-let (in real numbers, only 30,300 of the 207,900 properties in Q2 were bought by landlords).

 

In previous articles, I spoke about the slump of property transactions after the 1st of April (as landlords rushed through their property purchases in March to beat the April deadline). In Q2 of 2016, £1.976bn was raised in Stamp Duty from Residential Property. Of that £1.976bn, £652m was paid by buy to let landlords (£424m in normal stamp duty and £228m in the additional 3% surcharge).

 

However, looking at Q3, the numbers have improved significantly. Of the 235,000 property sales, nearly one in four of them (56,100 to be precise) were bought by buy to let landlords and of the £2.208bn in stamp duty, £864m was paid in ‘normal’ stamp duty by BTL landlords and an impressive £442m paid by those same landlords in the additional stamp duty surcharge.

 

The statistics suggest buy to let investors have thankfully not been deterred by the stamp duty surcharge introduced in April this year. The figures also show that 65.4% of “buy to let” purchases cost less than £250,000, 23.7% of properties were in the £250k to £500k range and 10.9% (or 6,100 additional properties) of buy to let properties bought cost over £500k – interestingly nearly one in four (22.2%) of £500k properties purchased in Q3 were buy to let properties.

 

 

 

It just goes to back up what I stated a few weeks ago when I suggested that many investors had rushed to make purchases before 31st March, making figures in the following months (Q2) artificially low when the 3% supplement was introduced, but in Q3 the number of buy to let properties purchased increased by 85%.

 

It just goes to show you shouldn’t believe everything you read in the newspapers! I can assure you the Chiswick property market is doing just fine.

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Average Rent Paid by Tenants in Chiswick rise to £2,608 per month

Back in the Spring, there was a surge in Chiswick landlords buying buy to let property in Chiswick as they tried to beat George Osborne’s new stamp duty changes which kicked in on the 1st April 2016. To give you an idea of the sort of numbers we are talking about, below are the property statistics for sales either side of the deadline in W4.

 

Jan 2016 – 48 properties sold

Feb 2016 – 47 properties sold

March 2016 – 114 properties sold

April 2016 – 30 properties sold

May 2016 – 33 properties sold

 

Normally, the number of sales in the Spring months is very similar, irrespective of the month. However, as one can see, this year was a completely different picture as landlords moved their purchases forward to beat the stamp duty increase. You would think that even with a basic knowledge of supply and demand economics, rents would be affected in a downwards direction?

 

However, there appears to be no apparent effect on the levels of rent being asked in Chiswick – and more importantly achieved – and this direction of rents is not likely to inverse any time soon, particularly as legislation planned for 2017 might reduce rental stock and push property values ever upward. The decline of buy to let mortgage interest tax relief will make some properties lossmaking, forcing landlords to pass on costs to tenants in the form of higher rents just to stay afloat. Even those who can still operate may be deterred from making further investments, reducing rental stock at a time of severe property shortage.

 

.. but it’s not all bad news for tenants. Whilst average rents in Chiswick since 2005 have increased by 33.3%, inflation has been 38.5% over the same time frame, meaning Chiswick tenants are 5.2% better off in real terms when it comes to their rent (which is a sizeable chunk of most people’s monthly household budgets)

 

Year Average Rent in Chiswick per month
2005 1957
2006 2006
2007 2066
2008 2151
2009 2189
2010 2176
2011 2258
2012 2359
2013 2437
2014 2474
2015 2557
2016 2608

 

 

I found it particularly interesting looking at the rent rises over the last five years in Chiswick, as it was five years ago we started to see the very early green shoots of growth of the Chiswick economy. As a whole, following the Credit crunch (2011), rents in Chiswick have risen by an average of 3.6% a year – fascinating don’t you think?

 

The view I am trying to portray is that while renting is often portrayed as the unfavorable alternative to home ownership, many young Chiswick professionals like renting as it gives them adaptability with their life. Rents will continue to rise which is good news for landlords as buy to let is an investment but, as can be seen from the statistics, tenants have also had a good deal with below inflation increases in rents in the past. It’s a win-win situation for everyone although on a very personal note, it’s imperative in the future that tenants are not thwarted from saving for a deposit by excessive rental hikes – there has to be a balance.

 

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