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Budget Sparks Property Price Increase Fear

Budget Sparks Property Price Increase Fear

UK property prices set to soar by 30%
Says Office for Budget Responsibility

UK residential property prices could increase sharply over the next five years, fuelled by a rise in the number of savers choosing to invest in property rather than taking annuity.

The forecast comes from the Office for Budget Responsibility (OBR), following the changes announced in George Osborne’s latest Budget which means that people will not be forced to take an annuity when they retire and instead they can choose to invest their money as they wish.

Many people are expected to use their pension pot to invest in property, rather than in currently poorly performing pensions, driving up UK property prices in the process.

The OBR has revised its forecast for UK residential property price growth in the next five years from 27% up to 30.8%.

According to the Office for Budget Responsibility forecast, anticipated UK residential property price growth is expected to be:

  • 8.6% in 2014/2015
  • 7.4% in 2015/2016
  • 4.3% in 2016/2017
  • 3.7% in 2017/2018
  • 3.7% in 2018/2019.

The predictions are the OBR’s best guess, they are not accurate in any way shape or form and should be used as a guide only. These are not fact, just speculation.

The OBR are supposed to be an independent fiscal body, however, they estimate that by the end of their forecast period, UK property prices should be just 0.5% below their pre-crisis peak, and the property price to income ratio is estimated to reach 2.3% below its pre-crisis peak.

The OBR also expects transaction volumes will increase at a faster pace than originally forecast over the coming five years. Estimating 1.28 Million housing transactions in 2014/2015, some 6% higher than the previous OBR forecast in December 2013.

The OBR also predict that Stamp Duty receipts will rise 90% over the next four years from £9.5 Billion (GBP) in 2013-14 to £18.1 Billion (GBP) in 2018-19.

The OBR report said: “House prices have continued to accelerate since our December forecast with annual growth reaching 5.5 % in December 2013. We expect house prices to peak earlier than in our December forecast at 9.2% in the 3rd quarter of 2014, with prices rising by around 30% by 2018-19.”

Property price growth is currently being led by London where even large estate agency groups like Savills forecast property values to surge by almost a quarter over the next five years.

According to a five-year outlook recently published by Savills, a number of risks to the prime property markets, such as Eurozone default, have receded over the past two years and Inner London boroughs could see a growth of 23.1%, and property prices in other areas of the capital could also rise by 22.7%.

2 Million Foreign Investors Own UK Properties

2 Million Foreign Investors Own UK Properties

Foreign Property Investors Think UK Property Is A Safe Investment

According to the accountancy group – UHY Hacker Young, the number of foreign property investors owning UK property has now exceeded 2 million.

The accountancy group analysed HMRC data and discovered that the number of overseas property investors owning and renting out property in the UK private rented sector increased by 6% in the past 12 months to 2.04 Million, up from 1.93 Million in 2012.

In the past five years the number of foreign property investors owning UK PRS property has risen by 39%.

However, the accountancy group says that the consistent growth in the number of foreign investors targeting UK property may come to a halt following the Government’s recently announced plans to charge Capital Gains Tax (CGT) on the sale of properties owned by foreign investors from April 2015. A move which could discourage foreign buyers from investing in UK property when the deadline comes in to force.

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Capital Gains Tax For International Property InvestorsUK To Tax International Property Investors

The Chancellor, George Osborne’s has taken a step towards levelling the playing field for UK property investors after deciding to introduce Capital Gains Tax (CGT) for international property investors, a move that has attracted a mixed response from property professionals.

While UK property investors have broadly welcomed the new tax for international property investors, some industry professionals have slammed the Chancellors decision to introduce it, with some pundits speculating that it could drive foreign investors away, increase housing supply and push property prices down.

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Councils must be free to borrow more to build new residential properties

Councils must be free to borrow more to build new residential properties

Councils must be free to borrow more
to build new residential properties

The Government must allow Local Authorities to borrow more money to spend on building so they can tackle housing shortages and build 60,000 extra residential properties in five years, according to the Local Government Association

The Local Government Association (LGA) said that the nine councils listed below were unable to take on any loans at all, even though they have over 40,000 people on accommodation waiting lists.

  • Darlington Borough Council
  • Dudley Borough Council
  • Exeter City Council
  • Gosport Borough Council
  • Harrow Council
  • Royal Borough Greenwich Council
  • South Cambridgeshire District Council
  • Waverley Borough Council
  • Woking Borough Council

The LGA said lifting a cap on local authority borrowing would allow up to 60,000 new residential properties to be built in the next five years.

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Help-To-Buy scheme Is The Deal Of The Century For The Government Government Say Help-To-Buy Scheme Is Creating

 75 New Homeowners A Day

The Prime Minister, David Cameron has been defending the controversial Help-To-Buy scheme, stating publicly that the scheme is creating up to 75 new homeowners a day.

Over 2,000 first-time buyers have made offers on properties using the scheme and the Prime Minister is rubbing his hands with glee because there is a dark secret behind the incentive.

More than £369 Million (GBP) has been lent to new home owners, making the loan figures average £155,000 (GBP) per person. Wages will likely rise with inflation and so will mortgage rates, doing little for the financial security of working homeowners who will be trying hard to pay off the percentage stake in their property that is owed to the Government.

Mr Cameron insisted that the state-backed loans are helping hard working responsible people purchase residential property to live in, and he also dismissed fears over a new housing bubble and taxpayers helping the wealthy middle-classes as nonsense.

What he did not say was what the prospects are likely to be, for people buying property now using the Help-To-Buy scheme, in a few years time.

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Demand May Outstrip Supply As Lenders Brace For Help-To-Buy Stampede

Demand May Outstrip Supply As Lenders Brace For Help-To-Buy Stampede

Demand May Outstrip Supply As Mortgage Lenders Brace For Help-To-Buy Stampede

Over 600,000 residential properties are eligible for the £12 Billion (GBP) scheme, while Zoopla says buyers will still need average £10,000 (GBP) deposit

More than 600,000 residential properties on the market are eligible for inclusion in the £12 Billion (GBP) second phase of the Help-To-Buy scheme, according to the latest in a series of surveys leading to predictions that UK mortgage lenders will be inundated due to the expected demand for the government-backed mortgages.

Details of the 95% mortgages, which are available to existing property owners as well as first-time buyers, are to be unveiled by Chancellor of the Exchequer, George Osborne, with some banks expected to invite loan applications within hours of the announcement expected next week.

The second phase of the Government’s flagship scheme to allow more first-time buyers and second steppers, wider access to the UK’s residential property market has already been brought forward by three months, with high street bank Santander claiming that up to 1.7 million people want to use the scheme.

The Help-To-Buy scheme will cover existing residential properties as well as new-build properties, but as yet there are no plans to allow Buy-To-Let property investors use the scheme.

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UK Residential Property Prices Continue To Increase

UK Residential Property Prices Continue To Increase

UK Residential Property Prices Up For Seventh Month In A Row

Residential property prices in the UK have continued to increase for a seventh straight month in August, according to the latest house price index released by mortgage lender Halifax.

The growth in property prices suggest that the government initiative designed to kick start the property market is indeed working, to support the demand from willing first-time and next time residential property buyers, although there are fears that the UK could see another property bubble emerging, because property prices are rising so quickly.

Halifax said that residential property prices increased by 0.4% from July 2013 and were 5.4% higher than 2012, providing the UK residential property market with the biggest annual price increase since June 2010.

In July, residential property prices increased 0.9% from June 2013, and were up 4.6% from July 2012.

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Help To Buy Scheme Could Cause New Property Bubble

Help To Buy Scheme Could Cause New Property Bubble

Critics Warn Help To Buy Scheme Will Cause New Property Bubble

The Chancellor of the Exchequer has launched the second phase of the ‘Help to Buy’ scheme and laid out the terms of a programme that will underwrite UK residential property purchases up to the value of £600,000 (GBP) following a meeting with mortgage lenders and house-builders.

A number of groups, however, have warned that, if this scheme is allowed to drive up house prices in the UK, it will cause another property ‘bubble’ and encourage people to take on huge mortgages.

George Osborne is hopeful that the terms of the scheme will prevent another property bubble, as there are now strict income checks and other lending criteria imposed by mortgage lenders and the loan scheme will not be allowed to be used by purchasers to acquire second homes.

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Top Economist Warns Of Fresh House Price Crash

Top Economist Warns Of Fresh House Price Crash

Disastrous House Price Crash Could Be Caused By
Government’s Funding for Lending Scheme

One of the UK’s leading economists has warned of a potentially disastrous house price crash and points the finger at the Government home buying scheme for being the cause of another unsustainable property bubble.

Chief Economist at the Institute of Directors (IoD), Graeme Leach, said the introduction of the new Help-To-Buy scheme, under which UK taxpayers are underwriting thousands of new mortgages for property purchases, means the world must have gone mad.

Mr Leach said “The Funding for Lending scheme is very dangerous because it will drive up property prices at a time when it seems likely that (property) prices are already over-valued.”

The scheme is one of Chancellor George Osborne’s financial initiatives where the Government will underwrite mortgage loans allowing new and first time borrowers up to 20% of a property’s value as part of their deposit, effectively giving the Government a proportionate stake in the value of the mortgaged property.

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Property industry reaction to 2013 budget

Property industry reaction to 2013 budget

George Osborne’s spring 2013 budget included new measures to help more people purchase their own homes and this news has been generally welcomed by property industry professionals.

The Chancellor of the Exchequer firmly believes that the measures announced in the spring budget will provide a major boost for the UK economy, despite calls for an economic U-turn from the Labour opposition.

Mr Osborne told the press that there were far more difficult decisions still to be made regarding the nation’s spending in order to get the overall deficit down, however, the government are taking measures to help people buy their own home.

The Chancellor announced that the FirstBuy scheme which was aimed at First-Time Buyers (FTB) on an income of up to £60,000 (GBP) per year, is being replaced with a ‘Help to Buy’ equity loan scheme available to all buyers looking to purchase a new build home up to a value of £600,000 (GBP), with a deposit of just 5%.

A new mortgage guarantee scheme was also announced during the spring budget, which extends the previous NewBuy Guarantee initiative to include older residential properties as well as new-build homes, which he hopes will result in a sharp rise in lending to potential homebuyers, thus kick starting an upturn in the UK property market. The new scheme will start in January 2014.

Buy to let mortgages are not going to be included under the new scheme, however it remains unclear if existing property owners will be able to purchase property without selling leaving them with an income producing property asset when they offer their old home for rental.

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