Market Commentary - June 2000
Spring is gone and winter is just a distant memory. Estate agents say the
"House-buying Season" begins at easter but although 2000 was shaping up
to be a bumper year around the chocolate season it has now slowed considerably. The strong growth in house prices
in London and the South-East has slowed a little, but the
north-south divide is still pretty evident: In parts of
London, SW1 the average
selling price for a flat is about £420,000 whereas in parts
the average selling price for a house is about £10,500!
Volumes of house sales were up last year and look likely to be higher
this year. There is still a long way to go before either the price
rises or sales volumes hits the heady heights of the late 1980's - but
it is certainly a possibility.
My view is the same now as it was then - before taking the plunge with
such a big decision as buying a house, you need to step back and take a
long, hard look at the numbers. You may love the garden, the schools are
great and you could even live with the 1970's avocado bathroom - but what
would happen if interest rates rose to 10% or more and house prices
stagnated? If the answer is "I'd drink draught beer instead of
bottled - and maybe not go out for a pizza every week." - then great.
However, if the answer turns out to be that you couldn't pay the mortgage
and couldn't afford to move, you might do well to rethink.
Many people can get carried away with 'getting on the housing ladder',
for reasons such as:
- "Prices are shooting up and if I don't buy now, the only thing I'll
be able to afford is a garage in South Shields" or
- "By the time we want to move again, the value of the house will have
doubled and we could get something really nice in the country"
- Both these comments are perfectly good reasons if you're certain that
prices in the area you want are going to spiral upwards.
As widely predicted the Chancellor increased Stamp Duty in the budget,
but not by as much as was expected. Rates on houses valued between £250,000
and £499,000 increased from 2.5 per cent to 3 per cent. Rates for
houses valued at £500,000 are now at 4 per cent, up from their
previous level of 3.5 per cent. Duty did not change for houses
between £60,000 and £249,000, set at 1 per cent and zero per cent for
houses below £60,000. More information is available on the
FT's budget pages
|Property Value||Stamp Duty was||After the budget||Increased costs
|Less than £60,000||Nil||Nil||Nil
|£60,000 to £249,999||1%||1%||Nil
|£250,000 to £499,999||2.5%||3%||£1,250 to £2,500
|£500,000 or more||3.5%||4%||£2,500 or more
Stamp Duty is paid at the specified rate for the whole amount so while
you would £900 stamp duty on a £60,000 property, if you can negotiate the
price down a few quid, you would pay nothing! There are a few things you can
do ease the burden:
- If the asking price is close to the threshold simply offer a bit less.
Peter Mandelson paid just less than £250,000 for his flat in Notting Hill,
saving £3,700 in stamp duty
- Look at the fixtures and fittings - and pay for them separately. If items
such as carpets, curtains etc are included in the price you can take them out
of the purchase price that is used for calculating stamp duty. There are two
things to bear in mind - the items must really exist and the values must be
reasonable. The Inland Revenue will take a dim view of people taking £60,000
off the purchase price for a pair of curtains and a cheap wardrobe
- Move to Newcastle!
September 1999's The Market including buy-to-rent
November 1999's The Market including sellers packs