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Tales from the Front Line

Edward Heaton

I have just been perusing the Conservative Liberal Democrat coalition agreement and have read the excellent news that HIPs (Home Information Packs) are to be scrapped. This is great news for the property industry. Since their introduction they have created an additional layer of bureaucracy to the house moving process, often taking weeks to produce and adding unnecessary costs. At the bottom of the market they have undoubtedly deterred some would be sellers from putting their houses on the market, whilst at the top end they are treated with near contempt by most solicitors, who simply don't trust the majority of the information contained within them. The EPC (Energy Performance Certificates) will be retained, which is no bad thing.

The document is silent about the Liberal Democrat's proposed Mansion Tax and also the planned increase in stamp duty to 5% on purchases over £1 million from next April, so watch this space. However, if the news about HIPs is anything to go by, perhaps this coalition government might just bring some common sense to our national politics. We can but hope.

Edward Heaton

Once a week our country team meets to discuss what each of us has been doing over the last seven days. We share property information, discuss our clients’ searches and inevitably we talk about what is happening in the market. Typically, with some regional variances, our market view tends to be fairly consistent. But in the last month or so some confliciting and somewhat confusing trends have developed.

Take the Cotswolds – one of the leading agents there has sold 85 properties in his area this year, when in a normal year he would have expected to have sold 55 or 60. The same agent has fewer houses available for sale at the moment than for as long as he can remember. Even some of the ‘old dogs’, which have been for sale for months, are selling.

In South Oxfordshire there is also an acute shortage of stock, especially in the £1 – 2.5 million bracket. So is it the old story of lack of stock and lots of desperate buyers out there? Well yes and no.

Conversely, there are also a few (there are never many) prime country houses that are currently or have recently been available for sale (many of them on the ‘private’ market) which, all things being equal, would normally attract bun fights in the street. Whilst there are still lots of prospective buyers trooping round to see them, in many instances no one seems willing to make the first move and offer. Some of those buyers who have been willing to commit have been rewarded with some pretty exceptional purchase prices. One high profile estate buyer should be particularly pleased with her recent acquisition…

It’s all a bit of a lottery really. Rather like politics and the economy then!

Edward Heaton

When I first heard about the Liberal Democrat proposal to introduce a Mansion Tax on all houses valued at over £2 million, I rather disregarded it as something that bore little chance of becoming a reality. However, with the recent surge in Lib Dem popularity and the real possibility of a hung parliament, I thought this deserved a little more attention.

I have now looked at the Lib Dem manifesto, which simply states that they propose “introducing a Mansion Tax at a rate of 1 per cent on properties worth over £2 million, paid on the value of the property above that level.” They expect the tax to raise £1,710 million for The Treasury.

Assuming the Mansion Tax is treated in the same way as Council Tax, then it will be payable on income that has already been taxed. So, if you own a £2 million house, the mansion tax will be £20,000, or £33,333 before tax for a 40% tax payer. A £5 million house will cost you an additional £50,000 each year.

What concerns me about all this is that if the Lib Dem’s end up in a coalition with either of the two main parties, then a Mansion Tax could be an attractive and easy means of raising some much needed extra cash, the introduction of which could be ‘blamed’ on the Lib Dem’s as part of a power sharing agreement.

Would a Mansion Tax have any effect on the top end of the property market? Absolutely, yes. We are already preparing ourselves for the increase in stamp duty to 5% on houses over £1 million from next April. This, together with a mansion tax could well be the final nail in the coffin for many house movers.

Finally, spare a thought for the lovely retired couple I met last week. They live in a crumbling Old Rectory which they have shared together for the last 50 years. Their house is worth around £3 million and it is their major asset. On paper, they are wealthy, but they are cash poor and live a relatively frugal existence. If the Mansion Tax is introduced, they will be faced with paying an additional £30,000 in tax each year, something they can ill afford to do. Is that really fair and proportionate? They are ordinary people who have worked hard all their life, who may now face the prospect of having to sell their home just to avoid paying an unfair tax.

It is not for me to suggest how anyone should vote, but one thing is for sure – a hung parliament (let alone a Lib Dem government) won’t be a good thing for anyone with an interest in prime residential property.

Edward Heaton

Outrageous!

by Edward Heaton
on November 20, 2009 in Country Search

outrageous.jpgWe have made an award today for the most overpriced house of the year. For the sake of good relations with the selling agent, we won’t identify it, but suffice to say it is about as compromised a house as you can get. Think motorways, flight paths, mainline railways, pylons, flooding, pig farms, intensive chicken sheds and bad messy neighbours. This house has very significant issues with several of the above, yet the guide price is several million pounds.

To win the award, we had to reduce the price by nearly two thirds before just one of us in the office would have been willing to buy it. And I think they were just getting fed up with how long it was taking to get down to a sensible price.

Sellers sometimes have unrealistic expectations of what their house is worth, but this is faintly ridiculous. If it does eventually sell, I’ll let you know how much it achieves, but don’t hold your breath.

In the meantime countless prospective buyers will waste their valuable time travelling to see a house that looks so lovely in the brochure. Perhaps they should have employed Property Vision!

Edward Heaton

I am increasingly being asked whether now is a good time to invest in a second home in the country. My advice is to take the advice of an economist you trust, then come back and talk to me.

If you (or the economist) think there is a strong chance that we are heading for a period of high or even hyper inflation, then investing your cash in property is probably a good idea. There used to be a saying ‘safe as houses’ and maybe, just maybe, it might be a term we will start using again.

If you are in the camp who believes that we have already seen the worst of it (and I’m not with them), then given how cheap money is at the moment, I would be willing to take a more bullish approach. After all, there is only ever going to be a limited supply of country houses – even in today’s market, the best houses are in very short supply indeed. So long as you buy as a long-term hold, not for any short-term gains, you should be ok.

For those that expect the outlook to be very gloomy for several years to come, then I would hold fire. Prices will probably continue to fall (we have seen nothing of the effects of unemployment yet and heaven help us if interest rates start rising to combat inflation). You might as well remain in the ‘cash is king’ camp and wait for your moment to pounce.

Of course, if you are selling and buying your principal home, then stay in the market. It is better to be in and to take the rough with the smooth, than try to second guess the market. Leave the gambling for your other investments, not your principal home.


 
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