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Autumn Statement, holiday let investments, mortgage rates and the London property market, energy efficiency in Haringey, house prices to fall

an image of person in a suit calculating the autumn statement and what it means for his buisness
28 November 2022

By UKinsuranceNET In News

The Chancellor’s Autumn Statement on government finances unsurprisingly dominates recent UK property headlines. It underpins commentary on mortgage rates and the London housing market, holiday let investments, energy efficiency, and the likely movement in average house prices in the next two years ahead.

Let’s take a closer look behind some of these stories.

Autumn Statement: Landlords hit by tax changes

One of the lesser-reported decisions in the Chancellor’s Autumn Statement related to the current rates of Capital Gains Tax (CGT). In a story on the 17th of November, the Mail Online reported how the changes will slash the income of landlords who choose to sell their buy to let property.

The newspaper explained that the current allowance of £12,300 before CGT becomes payable will be reduced by more than a half to just £6,000 at the beginning of the new tax year in April 2023. That allowance will be halved again – to just £3,000 – for the start of the next tax year in 2024.

Landlords who make a profit greater than the prescribed allowances will pay CGT at a rate of 18% if they are basic rate income taxpayers or 28% if they pay income tax at the higher rate.

The Mail Online estimates that a landlord who sells a buy to let property will lose an average of £2,600 as a result of these changes to the way in which CGT is calculated.

Invested in a holiday let? Here’s how to navigate the cost-of-living crisis

The surge in popularity of staycations during and immediately after the successive lockdowns of the pandemic fuelled a significant increase in investments in holiday let properties.

It is an investment bubble at risk of bursting in the face of soaring inflation, rising energy costs, and increasingly punitive mortgage rates, says a story in Property Investor on the 16th of November which offered some tips on navigating those adverse conditions:

  • make full use of technology for the smart management of your property’s energy consumption;
  • continue to employ energy-saving measures such as improved insulation and investing in LED lamps and bulbs;
  • while it might appear to offer greater convenience, your regular subscriptions to online lettings services such as Booking.com or Airbnb are expensive – consider managing the bookings for your holiday let yourself rather than relying on an expensive agent.

Soaring mortgage rates take the heat out of the London property market

Recent increases in the Bank of England’s base lending rate have fed into the mortgage market where rates are now also soaring, reported London’s Evening Standard in a story on the 16th of November.

The increased cost of a mortgage has inevitably damped the property market in the capital, yet average prices remain little changed from their all-time high.

While average prices of London residential property fell by a modest 0.6% in September – the biggest fall since July 2021 – those prices are only around £3,000 less than the record highs achieved this August, when the average reached £547,319. That is the result of the annual rate of increase in average prices falling from 7.3% to 6.9%.

That eased the annual rate of increase from 7.3% to 6.9% but prices are still only £3,000 below the record £547,319 reached in August.

Energy efficiency will be the focus of a new Haringey licensing regime

Meanwhile, in the London Borough of Haringey, landlords are given extra encouragement to adopt energy-efficient measures in their let property, revealed a story in Landlord Today on the 21st of November.

The local authority is introducing a new selective licensing scheme designed to combat “fuel poverty” among tenants.

The licensing scheme will target those privately let properties with poor energy efficiency ratings. Any landlord granting a tenancy to a single household or to two unrelated sharers will need to obtain a licence from the council – or face the penalty of enforcement proceedings.

UK house prices forecast to fall for the next two years

A story from the BBC on the 18th of November cited forecasts by the government’s Office for Budget Responsibility (OBR) predicting a 9% slump in average national house prices in the two years until the Autumn of 2024.

While the drop in prices might seem to be a major attraction for first-time buyers, they will continue to be hamstrung not only by the inflationary increases in the general cost of living but also by soaring mortgage rates that are significantly higher than at any other time in the past ten years – a two-year or five-year fixed rate mortgage currently attracts an interest rate of more than 6%.

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