Hadley Taylor Blog
At Hadley Taylor we like to keep our clients updated on the latest local property news and opinion.
30 April 2019
Time for action on Stamp Duty
We live in a very polarised society at the moment. Whether its Leave vs Remain, Tory vs Labour or Baby Boomers vs Millennials, opinions seem very divided.
When it comes to taxation there are also two camps. There are those who think taxes should be higher and those who think taxes should be lower. Higher taxes tend to result in less tax being collected by the government. This is because when you tax enterprise and hard work too much you end up discouraging enterprise and hard work. When government reduces taxes they always collect more revenue because people don’t mind paying a fair rate of tax so they are happier and more hard working. This has certainly been the case since corporation tax was reduced and since the 50% income tax rate was lowered. This simple truth has been well known for generations.
The present government haven’t followed this lesson across the board however. Since the increase in higher rates of stamp duty there has been a reduction in transactions across the property sector resulting in a reduction in tax collected. During the last tax year the government scooped £12.9b of our money in stamp duty which is quite a reduction on the £13.6b they scooped during the previous year.
Time for Philip Hammond to wise up and reform this odious tax on aspiration.
26 February 2019
Will Equity Release be the next big mis-selling scandal?
There was a time when if a retired couple wanted to pay off their mortgage or release some capital from their family home, they would sell their property and buy a smaller one. This was called down-sizing.
These days many older property owners fall for something called equity release. This relatively new financial product is promoted relentlessly everywhere we look on an industrial scale by corporations intent on squeezing every penny of profit from vulnerable people. If you turn on the TV, listen to commercial radio, go online or read a newspaper it won’t take long before you’re bombarded with adverts for equity release. These products are promoted as magical devices which enable retired folk to have a much better financial life, free of debt, mortgage repayments and worry. They promise a life rich in long haul holidays, new kitchens and brand new cars. In reality they are just loans against your property with relatively high interest rates and punitive penalties if you decide, for whatever reason, to exit the loan. They are fine for people who have no interest in leaving any financial legacy but they are a disaster for families wishing to pass on wealth to future generations.
Most retired folk would be much better off financially biting the bullet and down-sizing rather than taking the rather easier, but in the long run costlier, equity release route.
Many older property owners who need to raise some cash but still want to remain in the family home would be much better off financially with a lifetime mortgage rather than equity release. Some lenders specialize in mortgages for people in their 60’s, 70’s and 80’s specifically for this purpose.
I can see that in the very near future we will see a spate of lenders being taken to the cleaners by the financial regulator over mis-selling of equity release products in much the same way as we have seen over PPI.
22 January 2019
Is it time to turn off Rightmove?
Rightmove enjoy a monopoly position in the UK property portal market. As a consequence they have seen fit to raise their subscriptions by 14% this year. This is off the back of a 12% increase in each of the two previous years. It is only a matter of time, therefore, before Rightmove becomes our biggest single business cost if this trend continues. The consumer will of course end up paying for this corporate greed by way of higher selling fees….
There is of course no justification for this eye watering price increase. Inflation is relatively low and falling at 2.1%. Wage growth is also modest. In fact if I was an employee of Rightmove who wasn’t getting a 14% increase in pay this year, I would be very unhappy right now. Maybe dissatisfied Rightmove employees should talk to On The Market – I hear they’ve been hiring.
Rightmove’s behaviour is of course blatant profiteering. Estate Agents of every shape and size, up and down the country have had quite enough of being ripped off in this way. We should all work together to rid ourselves of this greedy parasite. On The Market is not perfect and for many early adopters it has not been an easy ride. However, OTM remains our best and only chance to break Rightmove and establish some control over our portal costs. Consumers will follow the traffic and they will quickly switch to the portal with the most stock. Rightmove is nothing without our stock. Some people will say that Rightmove is too big to fail but recent history tells us otherwise. Remember Nokia, Friends Reunited, AOL, MySpace, Blackberry and Emoov? I’m sure people thought these brands were too big to fail too but they have all been consigned to the corporate dustbin.
We need to agree a date at which point all agents turn off Rightmove and switch to an alternative platform and let’s make this our Independence Day.
11 December 2018
My predictions for the property market in 2019
Brexit looms large over the property market in 2019 as it does over much of our lives. Who could have foreseen in 2016 that we would witness such levels of utter incompetence on the part of the political classes and Whitehall Mandarins as we have seen in recent months. Uncertainty over the outcome of the Brexit negotiations has certainly caused some buyers and sellers to hold back and the longer this farce continues, the more damage will be done. We can only hope that there is a resolution in the spring and the country can move forward.
The governor of the Bank of England has predicted a 30% fall in property prices should we leave the EU without a deal. However, I don’t agree with Mark Carney’s dire forecast firstly because he is firmly in the project fear camp and secondly because Parliament has no intention of allowing a no deal Brexit. It is fair to say, however, that we have come to the end of the latest cycle in house prices and house price inflation will be flat for a year or two. Whilst our population grows at such a fantastic rate and whilst the vast majority of people in the UK have a job it is very hard to see how property prices can fall very much at all.
Interest rates will rise in 2019 but only by minute and gradual increments. Mortgage lending will continue to be strong but this is all about households refinancing and not at all about households moving on.
In recent years we have become a nation of improvers rather than a nation of movers. When I started my business in 2004 people moved house on average every 7 years whereas today we move house on average every 17 years. This remarkable change in behaviour is due in part to the high levels of property tax levied on each purchase, making it more cost effective to stay put and extend homes rather than move on up the property ladder. This trend is likely to continue in 2019.
Buy to let as an investment model will continue to fall away as the preferred get rich quick scheme for the middle classes. Changes in stamp duty and mortgage interest relief have increasingly taken the gloss off buy to let and 2019 will see this trend continue. We will see more, smaller landlords bailing out of this sector in 2019 whilst bigger players and those holding properties within limited companies may continue to make it work.
The good news for the property market locally in 2019 is that Norwich remains an extremely popular destination for buyers seeking career progression or a change in lifestyle. So if you have a property to sell there is no reason why you shouldn’t achieve a great outcome in the New Year.
11 September 2018
Has Help to Buy had its day?
The government is considering whether to extend or end its Help to Buy scheme. This initiative was supposed to help first time buyers get on to the housing ladder by providing tax payer funded deposits that would eventually be paid back at a low rate of interest.
Like most government interventions in the housing market, Help to Buy meant well but was always flawed for a number of reasons.
Help to Buy merely serves to increase demand and this in turn increases property prices. If we are to help young people get on or move up the housing ladder we need to moderate house price inflation, not stoke it. Help to buy has clearly helped to increased house prices.
In practice, Help to Buy has also enabled some rather wealthy people, who never really needed assistance from the state in the first place, buy very expensive houses in London which can’t really be described as starter homes. There are of course thousands of deserving buyers who were clearly in need of assistance who have also benefitted from the scheme.
Agents like me were always rather mystified why the scheme was targeted solely on new homes. Why did buyers have to buy a new home in order to get assistance from the tax payer? The answer to this question lies in the fact that house builders form an incredibly powerful business lobby in the UK with many directors of corporate house builders also sitting on the benches in the House of Commons and the House of Lords. As a consequence by far the biggest benefactors of Help to Buy have been the multi-millionaire chief executives of our nation’s biggest house builders.
UK governments have a very poor record of success when it comes to disrupting the UK housing market. History shows us that whenever governments intervene in this particular free market there are always unintended consequences. It would be best if politicians stayed well away from the property market but if they are going to intervene then in future measures should be properly targeted and thought through, preferably with proper consultation with professional bodies such as the Royal Institution of Chartered Surveyors and the National Association of Estate Agents.
I for one hope that Help to Buy bites the dust sooner rather than later.
14 August 2018
Should we build on the green belt to solve the housing crisis?
Liz Truss is the latest in a long line of politicians to suggest that building houses on the green belt is necessary to solve the housing crisis. The Member of Parliament for South West Norfolk thinks that building thousands of new homes in the countryside is the answer to all our housing problems. Firstly, I don’t agree that there is a housing crisis and I certainly don’t agree that building houses in the countryside is a good idea.
House builders, of course, love building houses in the countryside because it’s easier than building them in towns and cities on brown field sites and so they make more profit. Profit being the primary and probably the sole driver for any house builder, they would build houses on green fields all day long if they got the chance. House builders form a very powerful business lobby, however, and this is why ministers continually suggest concreting over the green belt.
The reason it’s such folly to build homes in the countryside comes down to our need to protect the environment. We are told that unless we get a grip on CO2 emissions during the next 20 to 30 years we are going to have to deal with the consequences of an over-heated planet, parts of which are going to become increasingly uninhabitable in the future. Therefore, any new homes must be built in towns and cities in close proximity to jobs, schools and other amenities. Most new homes today are built in out of town locations with at least two cars parked outside each house. Here in Norfolk the vast majority of residents in new houses converge in their cars on the nearest town or to Norwich on a daily basis. This is clearly not desirable from a traffic congestion point of view and it certainly conflicts totally with the Government’s supposed commitment to the Paris accord on climate change.
There are other practical issues such as lack of public services, school places, broadband access, electricity generation capacity, mains gas supply and water resources, to name but a few, that make big out of town housing developments totally unsustainable.
So why do we need houses in the countryside? We don’t. We do need some homes in urban areas and these should be small, efficient and affordable units. The sole reason we need more houses in the first place is because successive governments think it’s a good idea to increase our population. It’s time this government got a grip on the true nature of our housing requirements and stopped caving in to vested interest groups.
10 August 2018
Bank of England raises interest rates
The Bank of England has raised its base rate by 0.25% to 0.75%. This is as high as the base rate has been for 10 years and although interest rates are still incredibly low some younger borrowers might be more concerned about what effect this change in policy will have on their debt repayments.
There seems to be very little evidence that interest rates needed to rise at all so perhaps the real reason why Mark Carney has raised rates at this time is so he can cut them again to cushion the effect of the UK leaving the EU next year. Carney is relentlessly pessimistic about the UK economy and about our chances of thriving outside of the EU so he will want to hedge his bets and this perhaps explains his latest move. Carney has been wrong all along about how robust the UK economy has been since June 23rd 2016 but like most fans of globalisation he is not likely to change his view in a hurry.
As for the property market, I don’t think the rate rise will have much impact because money is still relatively cheap and most borrowers are on fixed rate deals so they won’t feel the pain for some time yet.
15 May 2018
What happens if my agent goes into liquidation?
There do seem to have been a spate of Norfolk estate agents going into liquidation in recent months. The reason for this is nearly always because these firms haven’t been charging enough for their services. Some consumers really do believe that they can get the best possible service for the lowest possible price and in the grown up world this is rarely the case.
If you are selling through an agent that goes bust you might find that your property is transferred to another agent who has purchased the good will value of the business. This may be a perfectly workable arrangement as long as you want your business being dealt with by the company in question. If a sale has already been agreed on your property when the firm goes bust then this shouldn’t be too much of a problem either because at this point your transaction is in the hands of your solicitor. You may end up paying your fee to the receiver or to a different firm of estate agents who have purchased the good will of the failed venture but this shouldn’t change whether you have to pay the fee or how much the fee should be.
My best advice is to pick a long established firm in the first place and not a firm that is here today and gone tomorrow