46 commercial property Planning to buy
James Matthews, an associate in the real estate team at Penningtons Manches LLP, reflects on changing property investment trends
With much talk in the media as to the difficulties young people face in getting on the property ladder, recent research by Prudential has shown an entirely different story for those aged 55 and over. Almost two in five homeowners within this age group are planning at least one further property purchase.
It is predicted that this demographic will spend in excess of £775 billion, spanning more than three million property transactions. Approximately 18% of such transactions will not be ‘homes to live in‘, rather second homes as well as development and investment properties.
Prudential‘s poll also concluded that the average maximum purchase price will be more than £250,000, with one in five commenting that they would be likely to invest £350,000 or more.
Given the age of the demographic, one would be forgiven for considering these investors to be ‘last-time buyers‘. However, one in 10 said they would consider purchasing further investment property in the future.
So what has fuelled the drive for this particular age group to purchase property? Property investment has always been seen as security for investors; protecting against currency fluctuations and the erratic nature of the stock market and commodities.
In addition, the
new pension rule changes have motivated over 55s to invest in buy-to-let property as a way of securing income throughout retirement. However, the increase in property purchases within this group isn‘t solely down to investment acquisitions
through companies set up for that purpose. Of course, the reduction in corporation tax is not the only advantage; costs may also be offset against rental income, leading to increased profits.
only be paid out in the form of a dividend and from April 2016, each director will be able to receive up to £5,000 each year, tax free.
– two in five have stated that they are planning a property purchase in order to downsize.
Overall, Prudential‘s survey confirmed a balance between those wishing to purchase investment property and those wishing to purchase a property which was less expensive than their current home in order to liquidise funds.
It is also predicted that with the Government cutting corporation tax to 19% in 2017 and 18% in 2020, higher rate taxpayers may increasingly be looking to invest in property
House price growth gathers pace as market conditions tighten
Acceleration in house price growth in the South East was reinforced by the imbalance between falling new instructions to sell and rising buyer demand, according to the latest RICS UK Residential Market Survey.
The RICS price indicator in the South East reached the highest level since June 2014, with a net balance of 64% more respondents reporting price rises over the past three months.
With both near and medium- term price expectations reflecting the imbalance between demand and supply in the region – 41% more respondents expect prices to rise over the next three months.
Further RICS analysis, using ONS data as the comparator, indicates that prices now look likely to rise in the region of 6% across the UK over the course of 2015, compared with 3% predicted at the beginning of the year.
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Meanwhile, transactions held more or less stable in the South East with only 2% more respondents seeing a fall in newly-agreed sales over the past month – compared to 21% more seeing a fall in July.
Looking ahead, respondents‘ sales expectations are upbeat in the region, with sales during the next three months predicted to rise. Indeed, 36% more respondents are expecting to see a rise rather than fall over the coming period.
It should be said that withdrawing cash from a pension fund, or setting up a company with a view to purchasing investment property is undoubtedly a complex process and could result in varying tax implications. We would advise anyone considering such options to first consult with their financial and legal advisers.
Details: James Matthews 01483-791800
james.matthews@
penningtons.co.uk www.penningtons.co.uk
Income to directors may
Simon Rubinsohn, RICS chief economist, said: “Given current market conditions, the latest data unsurprisingly shows house prices continuing to rise, and at an accelerating pace. As such, house price inflation across the UK has now quickened in each of the past seven months following a sustained period of easing towards the latter half of 2014.
“And there is good reason for this trend to be sustained into next year, however uncomfortable that may be for those looking to enter the market, given that so many of our members are telling us that they are struggling to replace the stock they have sold.“
At the national level, new buyer enquiries increased for a fifth month in succession, with 22% of respondents reporting a rise in demand, led by significant improvements in the West Midlands, Wales and the North West. New instructions, however, have yet to record any meaningful upturn since the middle of 2013, pushing average stock levels to record lows.
THE BUSINESS MAGAZINE – SOLENT & SOUTH CENTRAL – OCTOBER 2015
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