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Buy before the tax man stamps on you

Whilst holidaying in Kerala, I got to meet the owner of the villa we were staying at. The meeting was fixed and instigated by the family who were managing the villa; no doubt for a good kick back if anything was to occur.

The aim of the meeting was partly to see if she would be interested in investing in London property, and whether we could book the Villa at the same rate for next year.

The owner told me the same rate was out of the question, as the villa could easily be booked during this period ten times over – which admittedly was correct.

The other question, of investing, was interesting for me. It transpired she was a very well to do lady who had lived in Hampstead for a few decades. During this time she had sourced a couple of properties for her daughters, in Brixton and Shoreditch. Both of which have shot up in the last decade; these were areas with a bad reputation but with good sizable Victorian properties.

Her perception was apart from London there is nowhere worth investing in the UK.

She was a native Keralite who had married an English Gentleman and had gone to live in the UK for a while. There are not many business owners who are from South India, it is my experience that they generally make excellent employees; and as you head to North India they all seem to want to be Maliks.

This was a litmus test of someone who has active experience of the market and is from a business background, to show London has and will continue to hold pulling power to the exclusion of the rest of the UK.

In fact her plan is to come to London with the aim of securing another property in London for another one of her daughters.

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She is one buyer who will be purchasing before April 2016 when the stamp duty for BTL properties will increase. London will absorb this blow, it will come back again.

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My expectation is there will be a flurry of activity prior to April to close deals, following which there will be a lull in the market whereby the market absorbs and adapts accordingly. The rise will encourage investors, traders and developers to hold on to more property as the cost of purchasing has increased. Therefore the frequency of transactions will decrease.

This will be the third round of stamp duty changes in a short space of time, it will by no means be the last.

The government has an insatiable black hole to fill. The national debt currently stands at £1.63trillion; and if you include all liabilities it is £4.8trillion. I cannot fathoms these numbers as I have no framework to do so.

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The bottom line is the debt seems insatiable. Therefore as time goes on the government will need to find another form of tax in order to take money out of its citizens and into filling this hole. Who owns this debt? Who knows?

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According to the National Association of Estate Agents there are on average ten buyers for each property. According to this body house sales dropped in November 2015 but the number of buyers has increased. This is partially due to the season, as just before Christmas the property market winds down and the number of sales decrease.

However demand is heavily outweighing supply and this cannot be put down to seasonality. House prices therefore are set to increase. We will be in a sellers’ market as the year starts, this means sellers will be setting the price not buyers; this will be exasperated by the stamp duty increases.

It is therefore important if you do wish to purchase to execute quickly. In my experience a deal can be done in days or can take many months. A good set of lawyers is essential in order to expedite the process. It is imperative that those who have been sitting on the fence regarding purchasing property to do so quickly, before the hike in stamp duty kicks in.

If you have the time and expertise start looking now. If you don’t have them then instruct us to start looking for you.   We have the expertise to source according to your specification and ensure the pieces are lined up so the deal can be executed in a timely fashion and the increase will be avoided.  Of course we charge fees however this can be balanced out by the fact that you may not be able to find the property on your own or you may not be able to execute in time.

When doing the deal you could even make the date a condition of the contract; this will ensure the deal is expected on time from the buyer’s side.

April may seem a long way off but if you examine the time it takes to find a suitable property in London given there is an excess of buyers, compounded with the rush for everyone to do their deal before April, it is not that far away – time is ticking. It can take around a month to find a suitable property and then a month or a couple of months to actually complete. This will take you into March. This is dangerously close to April 2016 when the stamp duty increase kicks in.

The Real Deal

Edgware Road, London, W2

Purchase Price: £999,950

  • Approx. 1,050 sq ft area
  • Market value to be around £1.25m
  • Spacious accommodation
  • 24 hour porter service
  • Short walk from Marble Arch tube station

Call us now to secure!!

Suresh Vagjiani

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!Tips of the Week

Look beyond your doorstep. Investing where you live is often a safe but poor option. The question you should ask is: where will your money serve you best?

Always focus on the capital growth of an investment property – never sacrifice this as this is how the bulk of your money will be made, rental income is secondary.

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