On 25 November 2015, the Chancellor of the Exchequer, George Osborne delivered his Autumn Statement and made the following key property announcements:
Prioritising Housing in London: The government has continued to attempt to tackle the lack of housing, particularly low cost housing. Prioritising housing in London has long been on the agenda and it is good to see that the government is funding starter homes and a new London Help to Buy. Londoners with a 5% deposit will be able to get an interest-free loan worth up to 40% of the value of a newly-built home. Whether this creates a property "bubble" in London remains to be seen.
Buy-to-Lets and second homes: Having already struck at the buy-to-let sector with recent changes to mortgage interest tax relief and the annual wear and tear allowance, the Chancellor has continued his offensive, stating that "people buying a home to let should not be squeezing out families who cannot afford a home to buy."
Those buying second homes will also be affected. From 1 April 2016, those in England and Wales will have to pay a 3% surcharge on each stamp duty band. Capital Gains Tax (CGT) on residential property will have to be paid within 30 days of any taxable house sale from April 2019.
This could result in a rush to buy property before the changes take effect, and there are some concerns that this initiative could force an unwelcome increase in rent. It is unlikely to see investors offloading already acquired properties.
Flood Re regulations in force: The Flood Reinsurance scheme (Flood Re) is the system preferred by both the government and the Association of British Insurers (ABI) to secure available and affordable insurance against flood risk for homeowners whose properties are considered to be at high risk of flooding.
The regulations to establish Flood Re were made on 10 November 2015 and came into force on 11 November 2015. Flood Re is likely to commence business in April 2016.
Flood Re reinsurance is not available for many types of property. These properties will instead be subject to market-driven premiums and excesses for flood cover. It would be prudent for prospective buyers or tenants of property to establish whether their target property is at risk of flooding and, if so, whether it will fall within the scope of Flood Re. If not, then they may wish to check what flood insurance cover would be available, so as to ensure that its terms and cost will be acceptable.
For further advice contact a member of our Residential Property team.
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