New figures from Zoopla today show that the number of properties up for sale has risen 12%.
A surprising third (32%) are ‘chain free’ – which will include investment properties – while it is known that 13% of all those listed were previously rented out.
Coastal and rural areas have 40% more homes for sale than average – including second homes.
Buyer demand is up 26% in a year, sales up 25% and house prices up 0.7%.
Sarah Coles, head of personal finance at Hargreaves Lansdown, says it’s all down to a tax threat.
“Owners are falling over themselves in a rush to shift holiday homes and buy-to-let investment properties. They’re panicking that changes that might come through in the Budget could saddle them with a huge tax bill on their gains, making property investments even less attractive from a tax perspective” she comments.
It’s what she calls “yet another disappointment in the property investment journey … There’s every chance investing in property has hit them with endless tax and legislative challenges – some of which they never expected.
“The additional tax burden starts when you buy, and pay a stamp duty surcharge. Then, as you go along, there’s tax to pay on any rental income, and the rules have changed so you can offset less of your mortgage costs. The income tax may also be rising, thanks to frozen income tax thresholds which mean more people paying higher rates of tax.
“If this is a holiday home, then you may not have rental income to worry about, but council tax might be a headache instead.
“Popular spots for second-home ownership are set to double council tax on holiday homes next year, and some of them have seen the number of properties for sale rise by more than 40% as a result. This includes Truro up 47%, Torquay up 44%, and Exeter and Lincoln up 41%.”
“When they come to sell, there’s already Capital Gains Tax to pay on any gains on second properties – at a higher rate than on stocks and shares – but the Budget could make this bite harder. It might raise the rate of tax people pay on property gains, or it could force them to pay capital gains tax on properties they leave after their death.”
Coles says that property does not have the advantage of investment in stocks and shares, where there are steps you can take to protect yourself from tax.
You can hold them in tax wrappers like ISAs and pensions, so there’s no tax at all to pay on gains. For any investments you hold outside these wrappers, you can also realise the gains gradually, taking advantage of your annual capital gains tax allowance of £3,000. You can simultaneously use the share exchange (Bed and ISA) process to move the assets into an ISA at the same time, so there’s no capital gains tax to worry about on them in future either.
But none of these things are possible when it comes to bricks and mortar property.
She concludes: “UK investors have typically been drawn to property. People feel it’s something they understand because they own their own home already. However, if you’re considering investing in property, the tax position alone should make you think twice.”
This article is taken from Landlord Today