Today is a great day for property investors, farmers, and business owners as New Zealand’s Prime Minster Jacinda Ardern says no to a Capital Gains Tax. The TWG (Tax Working Group) spent months working on recommendations and presented their report to Government in February.
Feedback from business leaders, accounting professionals not just in New Zealand, but also from Australia, and property investors, whom were set to be hit the hardest, was overwhelming, and negative.
Prime minister, Jacinda Ardern said in interviews, recently, that she was surprised by the lack of appetite for the new tax. Really? 😳
The New Zealand Government is a three way coalition and partner NZ First was against such a tax from the get go and vetoed it.
What are the mainstream news sites saying?
All parties in the Government entered into this debate with different perspectives and, after significant discussion, we have ultimately been unable to find a consensus. As a result, we will not be introducing a capital gains tax.
On Stuff Ms Arden went on to say:
While I have believed in a CGT, it’s clear many New Zealanders do not. That is why I am also ruling out a capital gains tax under my leadership in the future.
The NZ First leader said the decision was not made until the “last few hours” But there was not sufficient support in the country for a capital gains tax. Peters said too much demand and a lack of supply was the issue in the housing market.
A severe shortage in the supply of housing, particularly in New Zealand’s main city, Auckland, has always and will always be the overriding cause of the housing crisis.
A capital gains tax on rental property may have acerbated the housing crisis further, and that worried more than just property investors. A likely outcome would have been the quick sell down of rentals leaving beneficiaries with nowhere to live.
Build More Homes
The Labour led Government are already using motels for emergency housing and clearly this is not their long term solution. It’s a quick fix, until more homes can be made available, ideally with new mixed housing property developments, but their Kiwibuild solution is not doing so well.
Labour’s target was 100,000 new homes within a decade, and 1000 homes by 1 July ’19. They are on track to reach just 300 homes they have a lot to fix. It’s the building of homes that has the support of voting New Zealanders and if they can get it right it is likely to see them return to power in 2020.
The ‘no CGT’ news did not please all.
On RadioNZ the AAAP (Auckland Action Against Poverty) said:
Wealthy landlords held the debate hostage by threatening to increase rents if their obscene profit margins from speculative gains were threatened.
Because of this decision, housing in New Zealand would continue to be seen as an “investment to make a profit” out of instead of a fundamental human right.
The housing debate will continue for years to come in New Zealand, and also in other countries.
The housing crisis is being felt globally, due to migration, and other economic and environmental challenges.
Governments are responding however, as we reported in this article: Tough new rentals rules make landlording harder.
Four Steps To Solve The Housing Crisis
There’s no escaping the fact there is a huge housing crisis taking place across most of the civilised West right now. Homeless figures continue to rise while wannabe first-time buyers are regularly priced out of getting on the property market. Whichever way you wish to look at the situation, the current system is broken.
Major politicians, real estate experts, and the general public all agree on this fact. Yet, very little progress seems to have been made during the past five years or so. However, there is a light at the end of the tunnel. Here’s how it can finally improve the situation for the first time in a decade.
Improved Opportunities For First-Time Buyers
Getting onto the property market has been nothing short of a nightmare in recent times. Generally speaking, millennial have been priced out of the market with research showing that the average age of taking that first step onto the ladder is 30! When you take into account that many of those buyers are couples that still require help from their parents, it paints a pretty glum situation.
Government schemes in various countries, such as Help-To-Buy ISAs have provided minor support, but their impact has been fairly minimal. After all, getting a deposit together is immensely difficult due to extortionate rent costs. In the United Kingdom, there has been a 100% increase in the last decade alone. Given that this has been the period directly after the Global Financial Crisis, improvements are clearly still needed.
The Post Office’s proposed mortgages with zero downpayments is a major step in helping wannabe buyers make that transition from renting to homeownership. If this can be matched by lenders in other Western countries, it should provide noticeable relief. Aside from getting more people on the ladder, the reduction of private renting can stop outside investors capitalising on the situation, which could result in more reasonable rental prices for those at the lower echelons of the financial scale.
Increased Affordable Housing
If the housing crisis is to be beaten, governments will need to take greater responsibility. A lot of politicians talk the talk, but actions speak louder than words. Affordable social housing is the key to getting people off the street or out of inadequate living conditions. Unfortunately, the supply simply hasn’t matched the growing demand.
Population growth and net migration have both contributed to the increased need for social housing and, while Brexit may slow migration in the UK, it is already beyond breaking point. Besides, the need for skilled labourers makes it somewhat of a catch 22 situation. Either way, research suggests that over 0.5% of the British population is homeless while those figures are even greater in other countries. It may be a little too simplistic to state ‘build it, and they will come’, but there is no doubt that there simply isn’t enough housing out there.
Proposals for increased lower-cost homes have included the fast-tracking of private developments where at least 35% of properties are considered affordable housing units. However, far more needs to be done to solve the bigger issues. The 1961 Land Compensation Act has kept landowners in great power for several generations. The longer they’ve held onto their land before selling, the more profit they’ve made. In turn, developers are forced to invest in more expensive properties. Land Value Taxes could be a huge first step towards fighting this problem.
On a similar note, the amount of properties that are currently unoccupied is simply frightening. Rectifying this issue must become a major priority for governments and national spending.
Vote The Right Parties Into Power
Whether it’s the UK, United States, Canada, or Australia doesn’t matter. The people in power set the tone and will ultimately make the big decisions that will affect us all. While the housing crisis is only one of several extremely important topics, understanding the policies set out in manifestos is a responsibility that everyone should embrace. Their future homeownership could depend on it.
Theresa May and Jeremy Corbyn have both had a lot to say in recent years, and continue to make promises about the future. Red or blue, there is no doubt that those elections will have a greater impact than ever before. Perhaps more importantly, the local elections will dictate how the housing developments are handled in individual parishes.
Unfortunately for you, we’re staying impartial on this one. The only thing we will say is that wasting your vote is nothing short of scandalous.
Boost The Economy
It may sound a little simplistic, but the only way to deal with the increased rate of rentals and purchase prices is for people to earn more money.
Foreign investment has swallowed up a big percentage of the profits made from real estate, but there are many other areas where people can earn more. And that goes beyond increasing the minimum wage structures, although this is clearly a step in the right direction.
It’s not simply a case of earning more. Reducing the debts incurred from loans, being a student, and other areas of modern life will aid the cause. After all, the interest rates on ridiculous payday loans, for example, restrict people’s opportunities for many years to come. Once you’re in that cycle, it’s very hard to escape. For this reason, education into financial responsibility is another important factor for improving the situation.
After all, the government and institutional improvements count for very little if individuals aren’t willing to help themselves. You can lead a horse to water, but you can’t make it drink.
The Final Word
After decades of poor decisions, rapid inflation, and quick population growth, there is no quick fix to the global housing crisis, especially as the world is still feeling the fallout of the GFC around a decade ago. However, those aforementioned steps can all have a positive impact and drag the economy towards the proverbial light, at least with regards to what is surely the most important sector.
Oh, and if you are on the property ladder, consider yourself very lucky indeed.
How Will Trump’s Climate Change Policy Effect The Environment?
Since he took office a year ago, there hasn’t been a single one of Trump’s policies that haven’t caused controversy. One of the more recent ones that have people worried is his decision to take the US out of the Paris climate accord. This was particularly concerning because the majority of scientific bodies around the globe agree that the only way to effectively combat climate change is through cooperation worldwide, especially between the largest powers.
It’s already common knowledge that Donald Trump doesn’t believe in climate change but now his denial is being transferred to policy and it could have a big impact on the world as a whole. Before his administration, the amount of carbon emissions that the US was putting out has been in steady decline but that’s all about to change. By removing the US from the Paris accord and rolling back other regulations on emissions, Trump will inspire an increase in carbon emissions from the US.
He’s also decided to scrap the Climate Action Plan that was started by the Obama administration but only half implemented. It won’t be in place enough for the positive effects to be seen and unfortunately, it won’t offset the damage that Trump is doing.
Researchers estimate that by 2030, the US will be producing an extra 0.4 gigatonnes of carbon dioxide into the atmosphere every single year. That’s a huge increase, especially for a country that was previously reducing its emissions by quite a significant amount.
Not only is Trump creating policy that will increase the amount of carbon emissions that the US releases, he is also actively slowing down the development of clean energy alternatives. While the global oil consumption per day is going down because we’re finding other energy sources, Trump’s policies risk reversing that trend in America. One of the central features of the Obama administration’s climate change policy that he’s trying to reverse is the Clean Power Plan which will put restrictions on how much dirty energy can be produced, forcing companies to develop green energy technology. While this would be beneficial for both the environment and the US economy, a revised version of the policy has been announced which is significantly weaker.
He is also attempting to forge a deal between China and Alaska to build a new gas pipeline. Although there are hurdles, this is just another of the ways that he is actively fighting against progress in clean energy.
Trump’s policy is going to increase the amount of emissions from the US and slow down the development of clean energy, but that’s not its most damaging effect. The US is one of the largest powers in the world and it’s very influential. While the world has less trust in Trump than previous presidents, people pay a lot of attention to him. Whether that’s because they hate him or love him, it can’t be denied that he has an impact on the world and if he continues to spread damaging attitudes toward climate change, he risks harming the environmental efforts outside of the US as well.
Top 10 most haunted places in Europe – only for the brave!
Europe has many secrets and amazing buildings and places that are surprising. Although we do not have buildings like pyramids (some mention the mysterious pyramid in Bosnia), there are still many places whose history evokes a thrill. Crimes, murders, love and sometimes a desire for revenge – such stories hide behind the walls of most haunted places in Europe! And some of these places look so charming and inconspicuous! Check for yourself if there is anything to be afraid of and go with us on an unforgettable trip for the most haunted places in Europe!
We have chosen one most haunted and mysterious buildings or places from several European countries, to present this place in our article, but there are for sure more places like that in all Europe. We often talk about buildings where paranormal activity is enhanced, many strange things are happened. Old castles, abandoned buildings – they usually have a frightening stories.
Read about the most haunted places that were once vibrant with life and now they are only visited by the bravest!
1. The Paris Catacombs – France
The name of this place comes from Greek and means kata – under and tymbos – grave. It is a system of underground, extensive … cemeteries. Inside there are skeletons of about 6 million people, who lived in Paris in XVIII and XIX century. Underground corridors are amazing because their walls are lined with skulls and bones of the dead. Although the Paris catacombs are around 50 kilometers, the route available to tourists is only two kilometers. Believe that in such a place it is better not to move away from the guide!
They deserve the name of the most haunted place not only because of their dark character and the number of people buried in them en masse. Although the walk in this place is really weird, there are also many dark stories about people who have been in the corridors. Walking and sightseeing, they suddenly lost their way. Some of them found. We will never find out how many people went missing in unexplained circumstances…
2. The Tower of London, England
For sure is one of the most popular and most haunted places in Europe, which everyones knows. The Tower of London was a prison for high-born residents of England, from which there was no escape. The insane king Henry IV was closed and probably murdered there.
But it is not because of him that this place is called one of the most haunted places in Europe. There is a story that the Tower of London is haunted by the ghost of Anna Boleyn – the second wife of King Henry VIII. A king who had no son decided to deprive his wife of life and thus end the marriage. Officially, Anna Boleyn was accused of betrayal and sentenced to beheaded.
Since then, many people have claimed that they saw the spirit of the queen who had been killed. And many think that The Tower of London is not only one from most haunted places in Europe, but even in the whole world. And the spirit of the beautiful queen seeks there vengeance and consolation.
3. Psychiatric Hospital in Lier, Norway
This place was to function as a normal, typical hospital for people with disorders. However, it happened differently. The hospital was the place where the most difficult patients stayed.
Instead of recovering health, however, they were subjected to strange and macabre experiments. Many people lost their lives there as a result of improper treatment, unethical experiments and tortures.
The hospital was closed in the 1980s. Today, the building remains an abandoned ruin. Nobody wants to redeem or renovate the infamous place. But Psychiatric Hospital in Lier is a place of frequent meetings and trips for seekers of strong impressions and ghosts. They claim that the place is haunted by tortured former hospital patients.
4. The Haunted Vicarage, Sweden
Another from top 10 most haunted places in Europe is located in Sweden and it’s quite unexpected. This is because it is a Vicarage!
The building was built at the end of the 19th century. And at the beginning of the 20th century, it became famous from a series of unexplained events. The clergy talked about the bad energy in the building, moving objects and the ghosts of three women.
Today, one of the most haunted places in Europe has been changed into a hotel! Everyone, who decides to spend the night there, in the morning gets a diploma for courage. It is not known if the hotel is still haunting, but the potential of the old building has certainly been greatly used.
5. Frankenstein Castle, Germany
The castle was the birthplace of the German alchemist Johann Conrad Dippel. Legend says that he carried out experiments on the corpses of humans and animals, trying to invent a way of bringing them back to life. When local people get known about strange experiments of Dippel, they banished him from the castle. And even though he left it, allegedly the souls of the people on whom he carried out the experiments are still there.
Johann Conrad Dippel was the prototype of the character of Dr. Frankenstein from the novel by Marry Shelley.
Frankenstein Castle is place of trips and journeys many peoples, which are looking for most haunted places in Europe.
6. Island Povelgia, Italy
In this case, not the single building is known. The most haunted places in Europe is whole island! How did it happen?
Povelgia is an Italian island near Venice. But the history of this island is nothing like the story of her neighbor. In the fourteenth century, when the plague epidemic broke out in Italy, many people died. The authorities did not manage to bury all the bodies. There were too many of them! It was decided that the bodies of the dead could be taken to a nearby small island… Povelgia. But it was not the worst! Along with the bodies of the deceased, people infected with Juma were also taken to the island. There awaited for them only a terrible death in torment and without any help.
For many years, it was claimed that the island is haunted. But at the beginning of the 20th century, the Venetian authorities decided to rebuild this place again. They decided to situated psychiatric hospital on Povelgia. It was not good idea. Huge and terrifying experiments on people were carried out in the hospital in secret. Part of the medical crew have lost its minds as a result of remorse and (as they say) paranormal activity.
Nowadays, one of the most haunted places in Europe is uninhabited. The whole island with destroyed, old buildings stands lonely. Do you have any doubts: why?
7. Museum of Auschwitz-Birkenau, Poland
Some of most haunted places in Europe are abandoned, some buildings became popular and expensive hotels or restaurants, and some of them became museums. Just like building of the Auschwitz camp.
Why is this one of the most terrifying places in Europe? The Auschwitz-Birkenau was a Nazi death camp, where over 1 million of people lost their life. Among the dead were people of different nationalities, men, women and children. Prisoners in the camp were tortured, starved and finally killed in gas chambers. Those who did not go into the gas chambers did not have more luck. On these people were carried experiments. The experiments carried out mainly on women and children, for example in sterilization, were very drastic.
Currently, the entire area of the former Nazi camp is a museum that is supposed to spread and popularize macabre history and to commemorate the dead people there. Museum of Auschwitz-Birkenau is place of many visits people from around the world. Surroundings, buildings and terrifying history have for years created a sense of dread in Auschwitz tours participants.
8. Houska Castle, Czech Republic
The legend says that the castle stands on a rock in which the entrance to hell is located.
Perhaps because of this, the accounts of the people, which seen the ghosts in the castle, say that you can meet there: hooded monk with an ax, a horse without a head, young women, a dog as big as a cow, a man without a face and many other wraiths and phantoms.
Currently, the castle building is used in many ways. Its part is open to visitors interested in historic buildings. In addition, the building hosts numerous fairs, tournaments, balls and even … weddings! Ghost stories have become an additional attraction for couples who dream of an original wedding.
9. Arrest Kilmainham Gaol, Ireland
That most haunted place in Europe was known as the largest prison on the British Isles. They were founded at the end of the 18th century. But it functioned until the beginning of the 20th century. Very difficult conditions prevailed there. The cells were not heated, there were no windows. Perhaps it would not be so terrible if it were not for the fact that the part of prisoners were there because of minor offenses like stealing food. The remaining prisoners were political prisoners, who fought for Ireland’s freedom.
The walls of this prison were witnesses of a heroic fight. The history of great love is also associated with this place. Joseph Plunkett and Grace Clifford they got married there for 10 minutes before before executing the death sentence.
Many people say that this place is haunted. But not everyone is afraid. Now the Arrest Kilmainham Gaol serves as a frequently visited museum. It also served as a scenery for several popular films.
10. Graveyard of Cars – Belgium
People argued over whether this place could be called a one of the most haunted places in Europe, but certainly many felt uncomfortable in it. But unfortunately for all seekers of unusual places – today it is just a memory. In 2010, for the sake of the natural environment, it was decided to remove Graveyard of Cars.
It gave the impression of a really haunted place. More than 500 cars lay abandoned there, covered with moss and overgrown with grass. Supposedly, American soldiers will abandoned them during World War II. However,this fact has never been officially confirmed. And maybe it never will be.
Are ghosts and paranormal phenomena exist? We can not be sure. There is often talk of bad or good energy that occurs in buildings. There are even people who seem to see ghosts or shifting objects. This is definitely an interesting puzzle.
We have presented you top 10 most haunted places in Europe, but for sure there are more places like that – with their own history, climate and specificity. It’s only up to you how you treat them – like scary, haunted places or like buildings with potential that can become an original attraction, a museum or even a place to organize weddings. The choice belongs to you.
USA New Tax Bill and Its Possible Effects on the Real Estate Industry
The recent tax bill passed by the US Senate that will be signed into a law by Trump is met with mixed reactions. For the real estate industry, it is an uncertain time because buyers and sellers are not sure what the impact of the new tax bill will be on their portfolio.
Currently, prospective clients are putting off purchases until it is clear what the implications are on their tax responsibilities while those who are planning to take out loans need to think carefully before diving in. From homeowners and realtors to families and students, the bill is going to touch the lives of every American in different ways.
What is it All About?
An overhaul of the tax system is expected to happen when the new tax bill takes effect. The first major revamp to occur in the US since the time of Reagan’s presidency, the tax bill aims to redistribute wealth in the country, stimulate economic growth by passing tax breaks and modify individual & corporate taxes.
On income taxes, the bill would lower individual tax rates. However, to comply with Senate rules, the individual tax cuts would expire after 2025. Standard deductions and exemptions would nearly double and more people are expected to avail of these breaks.
Family tax credits are also projected to increase two-fold with larger refundable portions benefiting lower-income families. For those sending their kids to private schools, the use of the 529 college savings plans will include K-12 private school tuition. Itemized deductions are limited such as medical expenses deductions threshold down to 7.5% of income from 10% of adjusted gross income and 20% deduction of pass through income starting at $315,000 for couples.
Corporate tax rates are at 21% down from 35%. For multinational companies, the territorial system applies where only domestic profits are taxed.
Impact on Real Estate
With respect to real estate, the bill will lower the threshold for mortgage interest deduction. People who are looking to buy new homes are only going to get up to $750,000 in deductions on their mortgage debt, down from the current cap of $1 million. This means that it will be harder for prospective homebuyers to find a house in areas that are more expensive such as New York or New Jersey because of a lower deduction limit.
The possible repercussions include current homeowners holding on to their properties, lower prices and sales. It also means they need to consider further expenses in addition to the essentials such as cover and protection for the home, survey costs and additional fees.
The new bill puts a $10,000 ceiling on state and property taxes eliminating an advantage of home ownership. Although it will mostly affect those in high-tax states, homeownership, in general, is expected to decrease because of unaffordable and unfavorable conditions.
Moody’s chief economist Mark Zandi predicts that nationwide housing prices will be 4% less in 2019 had the tax bill not gone into effect. According to NPR, homeowners will probably see a drop in property prices value.
For seniors who might decide to avail of reverse mortgages to see them through retirement, applying for this type of loan will become costlier once the tax law takes effect. Not only will it be more expensive to borrow, the limit of home equity loans will also be lower from the current average of 64% to around 58% according to the Wall Street Journal.
Upfront mortgage insurance premiums will rise from 0.5% to 2% for those cashing in less than 60% of the loan proceeds immediately (Forbes, 2017). Those who will take more than 60% of the proceeds, the mortgage insurance premiums will drop slightly from 2.5% to 2.0% (Forbes, 2017).
Another significant clause of the bill is the ceiling on property tax deduction. Individuals can only deduct up to $10,000 in state/local income and property taxes.
For residents of high-tax states, their taxes could be significantly higher come April. There is positive news though for home sellers; they can exclude up to $500,000 on capital gains provided they lived in their primary house for at least 2 of the last 5 years.
Clearly, the new tax bill with its perceived advantages and disadvantages will affect all Americans. Its real impact on the real estate industry is too early to predict. For now, people are putting off decisions to buy/sell or apply for a mortgage given the uncertainty.
Real Estate Negotiation Tips For Sellers, Buyers, Renters, Investors
Thanks to currencies, the art of bartering has been somewhat lost to the ages. However, that doesn’t mean that we can’t negotiate when dealing with things like property. Whether you’re buying, selling, renting or investing in property, we’ve put together some excellent tips to help you strike the best deals. These tips are also great for other things too, such as negotiating who does the household chores and who has to go on the weekly grocery run. Without further ado, here are a couple of fantastic negotiation tips for real estate.
Negotiation Tips for Sellers
First, let’s start with some handy negotiation tips targeted towards sellers.
- Play hard to get – You’re the one with the product and you’re the one in control. Play hard to get by refusing any kind of initial bid from the buyer. They’ll usually expect you to go back and forth on your prices, but by staying firm with your list price, you’ll quickly break down their confidence and they’ll start to offer what they’re actually willing to pay.
- Understand what you want – Not everyone wants to get the top price they can for a property and some people just want a quick sale. Ask yourself what you actually want from your sale. Is it just to get rid of something quick? Do you have a reserve price in mind? Or do you just want to see how high buyers are willing to go? Your requirements are going to define your actions to formulate a plan before you list something on the market.
- Be more assertive with offers – Don’t just send offers back and forth. If you really want to show you mean business, then reject offers that you feel aren’t worth your time. Instead, ask the potential buyer to submit another offer. This shows the buyer that you’re confident in the value of your property and that you know exactly what it’s worth. This can occasionally put buyers off, but those are the types that are only looking for a bargain, not a house they can call home.
Negotiation Tips for Buyers
Now let’s take a look at some of the best negotiation tips for buyers.
- Be friendly with the seller – If you’ve found a property that you really want then it’s in your best interests to be friendly with the seller. If you scoff at them for their initial price or if you mock them due to their counter offer, then you’re only going to get on their bad side. Don’t let your initial impression ruin your chances of getting the property that you want. Instead, cooperate with the seller to get the best prices possible.
- Don’t be afraid to go back and forth – You need to learn that sellers all welcome a bit of friction when it comes to making a deal. At the end of the day, they’ve got something for sale because they want to get rid of it so it’s not like they’re playing hard to get for no reason. They just want the best deal possible which is why you shouldn’t be afraid of going back and forth with the pricing. This will improve your chances of getting a fantastic deal and helps to cement the agreement.
- Learn the value of the house – When making an offer, focus on the value of the house and not the list price that has been mentioned. Look at sales on nearby streets or in the neighbourhood and make a smart decision based on your perceived value.
Negotiation Tips for Renters
Looking to lower your rent? Here are a few tips to ensure you can get the best deals.
- Be social and friendly with the landlord– One of the best ways to quickly get a great deal or at least some information about your landlord is to be friendly with them. The more suitable you look as a tenant, the more attention they’ll give you which makes it easier to become a tenant. If you can prove that you’ll follow their rules and requests, then you’ll seem like a perfectly reliable tenant.
- Don’t be outrageous with claims and requests -There’s only so much a landlord can do when it comes to things such as lowering the rent or installing a certain service or electronic device. As long as you don’t make ridiculous claims or ask for outrageous things, you and your landlord will have a great relationship that will help you negotiate cheaper rent in the future.
- Always talk in person – Unless you never see your landlord, it’s always good to speak with them face-to-face whenever possible. Be it bumping into them on your way to work or when they come down to inspect the property, it’s a lot easier to show emotion when you’re speaking face-to-face which means it’s much easier to mention topics like rent.
Negotiation Tips for Investors
Interested in buying property for investing? Here are some of the negotiation tips that you’ll need.
- Research before negotiating – It’s important to know what you’re talking about before actually talking about it. This tip counts for many things in life, but it’s especially important when you’re interested in investing in property because you need to show that you know about the market and that you’re knowledgeable in real estate fields. Identify the type of market that you want to invest in so that it’s easier to negotiate.
- Show positivity and confidence when negotiating – As with buying, selling and renting, you need to show positivity and confidence when negotiating. It’s a good idea to be assertive, but you need to remember that you can’t be overconfident in a field that you don’t know much about.
- Don’t be afraid to ask questions – Negotiating something like investing in real estate property takes a lot of time, effort and money. This means you shouldn’t be afraid of asking questions and you shouldn’t be worried about negotiating virtually anything you can.Whether it’s warranties, furnishing or even appliances, don’t let a single topic go untouched so that you know exactly what you’re getting when you invest in a property.
The Unsettling Effect of Brexit on UK Property Market
Despite the fact that the vote to leave Europe occurred over a year ago, the UK is still reeling from the impact of Brexit. It is theorised that the effect is not due to the break itself but rather the level of uncertainty that still surrounds the type of deal Britain could receive from Europe and where it would leave the UK as a global power. We have seen Brexit have devastating consequences for the value of the pound, but more recently analysts are starting to show evidence that Brexit is affecting the property market.
Many experts say that UK growth has reached a standstill and this has had varied effects on London and the rest of the UK. In the capital city, the first signs of Brexit are starting to be seen as investors pull out of the city. When this happens, there are fewer jobs, less opportunity for growth and a massive drop in interest, leading home prices to drop. Experts have suggested that London home prices will suffer a drop below an increase of just 7.1 percent per year. On the surface, this may look promising, however, this is less than half of the expected increase for homes in the rest of the UK.
This certainly seems to be the case for over the last 3 months, homes have risen 2.3pc high compared to the previous 3 months. This is a great gain, pushing the average home value in the UK to £225,856.
Good Or Bad News For First Time Buyers?
So, who will win in this type of scenario? Well, one real estate agency has received glowering looks by suggesting that millennials could afford to buy their first home if they just cut out a few of their favoured luxuries such as takeaway meals.
Of course, that’s not to say that the entire hypothesis behind the report is incorrect. Young home buyers could certainly be doing more to afford their deposit. It’s just probably not as simple as avoiding takeaways. Instead, they need to budget more effectively and need to take advantages of investment options to gain money for that deposit. However, there’s no denying that it’s difficult to save for a home. With the average wage being just twenty-seven thousand and the average price of a house is over two-hundred, buying just is not a realistic possibility for most younger buyers right now.
While the maths behind this logic has proved false, if home prices continue to drop in London and southern England, it could still be great news for the younger generation.
With home increases expected to drop below the UK average in London, it might mean that this will quickly become the best place for first home buyers to locate. Since the change is expected within the new couple of years, first time home buyers could start exploring the London property market in the next few years.
As of right now, however, the cheapest places for home buyers to get on the property market for the first time are still far from London. This includes Norwich, Nottingham and Southampton as well as Northern cities like Liverpool. This is where first time home buyers should be heading to look for a cheaper way onto the property market.
Who Will Really Benefit?
Meanwhile, cash buyers could certainly benefit from this situation, getting a property in London or even multiple properties and then letting them out as a potential investment possibility.
This is potentially who is going to fill the gap in the property market if home prices continue to fall in London. While some have suggested that local residents may move in, many people have suggested that London will become a city populated by tenants. This is due to the fact that rent prices have actually been decreasing substantially over the years since 2012, even as property prices continued to rise. As such, even before Brexit, it was easier to rent a place there then to buy a home.
Of course, now that property prices are continuing to fall, that demand for rented accommodation is going to attract potential investors who are eager to buy up property on the cheap and make a profit letting it out.
It is equally possible that home prices falling in London could lead to more young local residents buying. When younger residents around London reach the age where they start to consider buying property they tend to move away to the East or North. However, if property prices continue to drop, this could allow them to stay in the area and buy up properties there instead.
The Worst Could Be Yet To Come
Although a reduction in home prices should signal good news for first time home buyers, the situation is not that simple. Interest rates are steadily rising, and banks are already putting up their rates on home loan products. This will make things far more difficult for the property buyers in general and even homeowners. Many people have suggested homeowners will have trouble selling their property because the cost of bills and rates will deter new buyers. This could have a devastating impact on the economy with homeowners unable to sell and buyers unable to afford the investment.
The good news is that as of right now, according to rating agency Moody’s the rise in interest rates will not hit the property market. Currently, the situation is stable. However, if the uncertainty around Brexit continues that could easily change.
This month the Bank of England raised interest rates to 0.5 percent for the first time in a decade. Although this is not expected to impact typical homeowners and their mortgages, buy to let owners could be in trouble with rising arrears and increased taxes. Perceived as the weak link in the property market right now, if the property market does get worse leading to a financial breakdown, buy to let owners and their inability to pay their mortgages could ultimately be the reason.
As we wait for a deal to be made on Brexit, time will only tell as to whether it could have a further ripple effect on the UK property market. Right now, there are certainly more negatives outweighing any potential positives that could be experienced by certain investors.
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