New government policies could help property owners
Property professionals
30th July 2010
A series of policies announced by the new Conservative-Liberal Democrat government since the general election on May 6th could significantly benefit property investors, including a decision to increase the threshold for capital gains.
News that the administration is committed to reducing red tape and has already suspended the home information packs scheme has already been welcomed by many investors.
In addition, the emergency Budget delivered by chancellor George Osborne on June 22nd included provisions to scrap plans introduced by the Labour government to change the current system of tax incentives for holiday lettings and reassess the tax rules to ensure they meet European law.
Sarah Lyons, group managing director of Giles Insurance Brokers Ltd., commented: "Owners of rental properties might want to ensure that they take note of any legislative changes being brought in by the new administration that may affect their investments or returns."
In some ways the emergency Budget was a mixed bag for those with residential homes, as a decision to increase capital gains tax (CGT) to 28 per cent for those in the highest income brackets could have an impact on some landlords, prompting property sales in some quarters.
In light of this, FirstRungNow.com managing director Helen Adams suggested that the domestic rental sector could become more competitive as a result, which could be good news for those who are considering entering the market, with the 18 per cent rate of CGT remaining in place for those with lower taxable earnings, as well as the annual exempt amount of £10,100.
Tom Entwistle, director of website LandlordZONE.co.uk, has predicted that the rise in CGT for high earners and the decision to lift VAT from 17.5 per cent to 20 per cent will have little impact on the residential property market.
However, there remain some pressures in place on domestic property investors, making it more important than ever that effective insurance is in place. For example, the National Landlords Association reported that one in five (21 per cent) private residential landlords have experienced tenants being in arrears with their rent during the past three months.
This was a slight improvement on the 24.5 per cent during the first three months of the year and there was a substantial drop in the amount owed by such renters from £978 to £799, potentially indicating an easing of conditions as the UK economy recovers from the recession. In such cases, the NLA advises landlords to maintain good levels of communication with tenants to address any problems with arrears early.
Furthermore, recent figures have indicated that tenant demand remains stable in the sector, with data from CHL Mortgages showing that more than half of landlords polled (55 per cent) reported levels remaining the same during the first six months of 2010 as the previous half-year, while 35 per cent claimed that demand had risen over the period in question.
