London Property Newsletter - August 2015
London Property News
Here’s what we’ve got coming up in this month’s Fish Need Water newsletter:
- Sellers: how to deal with the dreaded “chain”
- Landlords: what does the Budget mean for you?
- The news you need right now.
- Top tool: text expansion!
We’re in chains
First things first: why isn’t Tina Arena’s song used more widely in all those property TV shows? Missed opportunity, we think!
Deep philosophical thought over with; let’s move on to the practicalities.
A property chain is a line of buyers and sellers who are all simultaneously involved in linked property transactions. If just one transaction falls through or is delayed, the chain breaks and everyone is affected. It’s frustrating and time-consuming – not to mention heart-wrenching when you realise you’re unable to buy and move into your dream home after all.
While you can’t 100% prevent the collapse in a chain (because there are so many people involved), there are some things you can do to make it less likely. Here are some ideas:
- Many deals fail because someone has applied for a mortgage too late, and the finance hasn’t come through in time. Avoid being the weakest link in the chain by having your mortgage offer in place before you start making offers on properties.
- Consider applying for a bridging loan, which can help you buy a new property before you’ve sold your existing one. A bridging loan is a short-term loan with a relatively high interest rate – so it should only be used when you know there’s just a short gap in the sale and completion dates in the chain. The major benefit is that it can usually be arranged very quickly.
- Break the chain on purpose! If you decide to sell your property and move into rented accommodation, there are two major benefits. Firstly, your property will be more attractive to buyers because they know you’re at the end of the chain. Secondly, you will have serious preferential status over other buyers when you’re ready to buy your next place, as you’ll be seen as a safer bet.
- Whatever path you choose, keep talking: a breakdown in communication between buyers and sellers often leads to easily preventable problems.
If you want some advice for your specific situation, phone us for a chat – you don’t even need to be a customer. We’re on 020 3199 3462.
Landlords: well, we weren’t budgeting for that!
If you know that the Summer Budget has big implications for your investments but you’re not sure what, exactly, you’re not alone: we’ve had plenty of landlords call us up with questions about it – specifically with regard to mortgage interest tax relief and what it means.
The main gist is this (bear in mind it only applies if you invest in property as an individual rather than a company):
At the moment, income tax is only be applied to the profitable portion of your rental income: you can deduct maintenance, letting agency fees, interest payments, etc. first.
So let’s say you have monthly rental income of £1,000 and interest payments of £300. And to keep things simple, we’ll say you have no other costs. You can currently deduct £300 from your income, to give you a profit of £700 to be taxed on. That tax would be £140 at the basic 20% rate, or £280 at the higher 40% rate.
Here’s what’s changing: from 2020 year onwards (although it’s being phased in from 2017), the whole £1,000 will count as profit: you won’t be able to deduct mortgage interest as a cost. Instead you’ll be able to claim a tax allowance of 20% later – regardless of which tax band you’re in.
So with that £1,000 income, the tax due would be £400 for a higher rate taxpayer. From that you can deduct 20% of your mortgage interest, which is £60. That leaves you paying £340 (which is £60 more than you’re paying at the moment).
If you’re a basic rate taxpayer, the amount of tax you pay won’t actually change at all even though it’s going to be calculated in a different way. If you pay at the higher or additional rate, you’ll soon be expected to hand over a larger portion of your profits to the taxman each month. Not good.
There were plenty of other property-related announcements in the Budget, and we’re happy to run through each and every one of them with you: just give us a call on 020 3199 3462.
Let’s take a look at the papers…
- Proceeds of foreign crime “pushing up London property prices”. According to the National Crime Agency, foreign criminals are laundering billions of pounds by purchasing prime London property.
- Stamp duty rise sees super-rich prepared to pay £20,000 per month to rent London property. Non-criminal wealthy people, on the other hand, are choosing to rent luxury London homes rather than pay stamp duty (which has increased for homes worth more than £937,000).
- Property developers told to rebuild London pub “brick-by-brick” after illegally knocking it down. The saying, “It’s better to ask forgiveness than it is to get permission” doesn’t seem to have gone down so well in Wandsworth…
- London landlords face penalties for empty flats. The London Borough of Islington has become the first council in Britain to impose rules to stop flats being left empty.
Our useful tool of the month
A “text expander” is a little piece of software that you install on your computer, and it speeds up your typing by replacing abbreviations with any phrase or sentence you use frequently (called a “snippet”).
If you find yourself emailing estate agents frequently with the same kind of message, you could create a shortcut like “agentemail” and as soon as you type it, the entire body of an email would appear.
Or if you’re always on Rightmove, you could create a snippet for the URL so you only have to type “rm” into the address bar.
Are you constantly needing to type out your address? Use an abbreviation like “se22” to create a snippet like:
Fish Need Water
1-2 The Parade,
Dog Kennel Hill,
London SE22 8BQ
Useful, right?! You can find plenty more use-cases here.
For Windows users, we recommend WordExpander.
For Mac users, we recommend aText.
The end! (Until next month.)
We’ll be back in September with more news and gossip, but feel free to email or call us at any time for advice, information, or even just a bit of a natter.
Speak to you soon!