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How the 2014 budget will affect you and me as property investors?

March 24, 2014Article by Ray Withers

For those of you resident in the UK, I’m sure you will have been glued to the news, as I was last week, waiting to hear the Chancellor of the Exchequer announce his 2014 Budget and discover what implications it would have for property investors.

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More homes and bubble evasion

Although savings dominated the headlines, George Osborne’s made it obvious that a lot of the economic feel-good factor was down to a buoyant housing market. His pledge to Get Britain Building was certainly welcomed by the team and I here in the Property Frontiers head office as it’s been quite clear to all of us that the supply of homes has simply not kept up with demand in recent years.

The Chancellor re-stated the fact that Britain still needs an additional 200,000 homes by 2020. He also announced a £500m builders’ finance fund for small developers to compete against big house builders.  At the same time, the Chancellor quashed speculation of a housing bubble stating that most regions are still below their pre-downturn peak and that he believes that the Bank of England will be careful to keep the market (and interest rates) under control.

Taxes

The Chancellor disappointed many when he failed to raise thresholds. However, the government has continued its clampdown on the use of off-shore companies to own property. The Chancellor extended the annual tax on homes owned through offshore companies from properties worth over £2m to those worth more than £500,000. However, the tax does not apply when the properties are rented out. It is an effort to persuade overseas buyers not to leave their UK properties empty.

Pensions

As of April 2015, individuals aged 55 and over will be able to withdraw their pension money as a cash lump sum without having to buy an annuity, and therefore will be able to invest it as they like – opening up a whole new world of investment opportunities.

I do think that with the property market now booming, we will see more investors investing part of their pensions in property. As many who know me will have heard me reiterate – the reason I believe in property over stock and shares is that you are investing in a tangible asset, that if chosen correct (and at the right time) will not only provide a good income (ours averaged 12% in 2013) but also capital appreciation. Also, unlike pension annuity which expires in value when you pass away – a property will continue!

Help to Buy extended

Many will know that under Help to Buy, the government helps first time buyers of new and existing homes up to the value of £600,000. The help takes various forms from loan guarantees to an actual loan up to 20% of the property value.  In all its forms, the scheme means that buyers need only find a 5% deposit.

We certainly welcomes the decision to extend the Help to Buy scheme which will help a further 120,000 people get on the ladder. The scheme, launched in 2013, has already had a noticeable impact on the housing market stability and is expected to continue to do so in 2014. This is great news for investors as it is going to cause increased demand for property, increased prices and therefore significant capital growth on properties over the next few years and makes buy-to-let a safer investment.

So all in all, positive news for the UK property market along with a number of other opportunities… The door is now open for peer-to-peer lending into the UK property market which could be very exciting… we are actively looking into opportunities so watch this space for more information.

Author

Ray Withers

Ray has over 17 years’ experience in the international property market and bought his own first international property investment back in 2002. Aside from running Property Frontiers, Ray has been involved in residential, hotel, student and commercial property investment and development in both the UK and overseas and co-wrote "Where to Buy Property Abroad - An Investor's Guide". As Founder and Trustee of the Frontiers Foundation, Ray is directly involved with many of its projects to ensure they have a direct and tangible impact in individual communities across the globe. He is passionate about property, travelling, scouting out new opportunities and finding time to spend with his young family.
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