The Property Ombudsman

What the 2015 Budget means for investors

This week, Chancellor George Osborne delivered a budget to get Britain on the road from ‘austerity to prosperity’ and will no doubt have a positive affect on the UK and the future of the economy. Many of the new announcements have already been welcomed by the general public but now we’ve had chance to digest them, we’ll look at the main changes here that are likely to affect the property market.

Economy

The chancellor noted the strength of the UK economy has improved; as growth of GDP has risen from 2.4% in the Autumn Statement to now 2.5%. Unemployment rates have also fallen to 1.86m – a significant drop of 102,000 in the three months to January, moving the UK towards a more stable economy.  

The economy and unemployment rates go hand in hand with the property market. The better the economy performs, the more people in employment and the more disposable income available to keep up rent and mortgage payments.

Pensions and Annuities

As announced in the 2014 Budget, pension freedoms are still set to take effect from April this year and allows anyone over the age of 55 to have complete access to their entire pension savings.

Whilst the news last year was welcomed by many whose retirement was fast approaching, there were concerns raised from those who had already purchased annuities. The Chancellor responded to this by announcing that those who had ‘missed the boat’, could sell their annuity in exchange for a cash lump sum. That’s an extra five million people who could potentially release their pension savings.

Already, before the changes have taken place, there are reports of pensioners turning to buy to let property to invest their funds. Sequre’s own research discovered that 52% (of those surveyed) are considering property investment as a means of securing their financial future.

Flexible ISAs

From Autumn 2015, savers will now have the freedom to withdraw cash from their ISA and place it back into their account without it affecting their annual ISA subscription limit for that year.

Whilst this would have helped many who want to temporarily withdraw their funds, the requirement to replace it within the same year will have no doubt dampened the excitement.

The headline alone would have been enough to gather the interest of many property investors. Whilst ISA returns are pretty low and the returns on property being considerably higher, the prospect of withdrawing funds to purchase a buy to let would have been a major attraction. The thought of taking an ISA break to invest in property, waiting for prices to cool (as they do during any property cycle) to then sell the property and put the profit back into an ISA would have been a game changer. However, the sting in the detail makes it not so appealing to an investor after all.

We still think it’ll help many investors, just not as many as it would if the ISA was completely flexible with no restrictions.

Help to Buy ISAs

The Help to Buy scheme has continued to be a major focal point for the government to help first time buyers get onto the property ladder.

The new Help to Buy ISA will give savers a helping hand whilst saving for a deposit. For every £200 a first time buyer saves towards their home purchase, the government will contribute £50, capped up to a maximum of £3,000.

So if a first time buyer saves £12,000, this will increase to £15,000 with contributions from the government. However, there are restrictions in place. Savers will only be able to redeem their Help to Buy ISA against properties worth £250,000 or less, unless they purchase in London where the limit is up to £450,000.

They can only save a maximum of £200 each month too. So if a first time buyer was looking at purchasing a £150,000 home with a 10% deposit, it would take them five years. That’s a long time to wait, and house prices can change quite a bit in 60 months.

What else may interest investors?

The Chancellor also addressed the strength the North, in particular the North West. Employment rates grew faster in the North West than London last year and this has been enough for the government to sit up and take note. The promise of building a “Northern Powerhouse” will give Greater Manchester alone an £11 million investment and areas in the North will now have much more control over the way that public money is spent. If the creation of the Northern Powerhouse continues, the North looks set to create even more affordable housing and greater investment into the region as a whole.

The creation of the Northern Powerhouse is exciting news for those across the UK. London has been a prime focus of the housing market as prices remain so much higher, and often increase an unsustainable rate as a result. Regional growth will encourage buyers outside of London meaning the market will strengthen collectively rather than in one particular area, with more buyers looking away from the capital when considering their investment purchase.

If you’ve been considering a buy to let property call our team on 0800 011 2277 for further information.

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