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Property and the Budget - James Bailey, Henry & James

Property and the Budget

The property industry waited for the Budget with baited breath. The proposed rises in Capital Gains Tax in line with income tax rates would have a huge impact on the housing market. Instead of being taxed at 18 per cent when selling a buy-to-let investment or a pied a terre, it was rumoured that vendors could be charged up to 40 or 50 per cent. Lettings agents predicted a fire sale of buy-to-let portfolios as landlords attempted to escape the tax.

When the Budget was announced and it was revealed that high rate tax payers would “only” be charged 28 per cent, most property owners heaved a huge sigh of relief. Perhaps surprisingly, though, a lot of estate agents saw a missed opportunity. The 40 or 50 per cent increase would have generated an influx of stock, giving buyers much greater choice.

You see, prime central London has been suffering from a phenomenal shortage of stock for over a year. I am normally delighted to take on new applicants but in this climate, when a person walks through our doors searching for a two-bed flat with a budget of up to £1.5 million. These days I am frustrated that we don’t have more to offer - we have 15 others looking for the same thing and only a couple of flats to show them.

If CGT had gone up in line with income tax rates next year, the number of vendors seeking to offload their pied a terres and investments would have helped with this supply problem. As it now stands, we are in for continued stock shortages and price rises as demand outstrips supply. There will be many more frustrated applicants over the summer.

At least the matter is now settled. We know where we stand in regards to CGT and taxation levels in general. We were all braced for an austerity Budget and when it was announced, it was not as bad as many feared. Now that it is out there, those who were betwixt and between can get on with their lives and sell, buy, let or whatever they need to do.

James Bailey

James is head of sales at Henry & James. www.henryandjames.co.uk


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