2022年11月22日星期二

UK Property - No running from tax hikes... 20221122

Since our 13th May, 20th May & 20th September bearish analysis of the UK property market, things have not improved on any front. Now, the Autumn Statement 22 just delivered by the Chancellor either added or worsened headwinds the UK is facing: as we have feared, higher taxes will now follow the double whammy of higher finance cost and higher inflation... 

Some significant tax hikes are summarised here:

Higher rate payers now hit sooner

  • 1/4 million more people in Britain would pay the top rate tax as a result;
  • Higher earners start paying top rate of tax earlier - threshold lowered to £125,140 from £150,000:

Dividend tax allowance halvings

  • allowance will be halved from £2,000 to £1,000 and then halved again to £500 in 2024 - will hit entrepreneurs and small businesses most

Capital Gains Tax exemption cut

  • annual exemption will halve from £12,300 to £6,000 from April 2024, then drop to £3,000 from April 2025
  • People will hold off from selling, or quick spike in sales before implementation of the new threshold

Other key changes:

  • 6-year freeze on the personal allowance = millions pay more tax;
  • The Inheritance Tax nil rate band have been frozen at £325,000 until 2028 = pay more if values increase;
  • The Residence nil rate band have been frozen at £175,000 until 2028 = pay more if values increase;
  • Energy firms hit with Windfall Tax of 35%, up from the 25% already levied = no cash left to invest in supply to alleviate high energy costs;

In the meantime, the pace of inflation keeps accelerating - the Oct reading is now a new high of 11.1% YoY:

all while our expected peak of price-earnings-ratio may have now arrived too - suggesting underperformance in home prices vs income (probably anaemic given the worst economic outlook on record - see article 2 for details):

On top of all these, the life of landlords will continue to deteriorate as residual rights to their own property get progressively pried out of their hands, see article 1 below.

As a result of these alarming datapoints, and our expectation of further GBP weakness, the reason to keep holding properties there is diminishing by the day... Sell if you have not already started. The winter is only beginning...


---------------------------article 1 - below are our extracts-----------------------------------------------

A FAIRER PRIVATE RENTED SECTOR?

21 Oct 2022 by ALEXANDER CLARKE

On 11 October 2022, the Government confirmed it would commit to a manifesto pledge and honour the White Paper ‘A Fairer Private Rented Sector’. This means a ban on no-fault evictions for private renters and essentially scrapping Section 21 of the Housing Act 1988, amongst other new measures.

No more no-fault evictions?

  • As part of this proposed change, a landlord would no longer have the right to end the tenancy for no reason and it would be necessary to give reasons (i.e. rent arrears, breach of tenancy) and pursue a possession order under Section 8 of the Housing Act 1988.
Decent homes standard

  • As part of the White Paper, the Decent Homes Standard, which already applies to social housing, will be extended to the private sector.

Other proposals

Other measures in the White Paper include:
  1. Introducing a new single Ombudsman to whom all private landlords must be answerable
  2. A new Property Portal to help landlords to understand, and comply with, their responsibilities, as well as giving councils and tenants the information they need to tackle rogue landlords.
  3. Stronger enforcement powers for local authorities
  4. Only allowing increases to rent once per year, end the use of rent review clauses, and improve tenants’ ability to challenge excessive rent increases through the First Tier Tribunal.
When?

The proposals will require legislation before they come into force and it was expected that Government would introduce a ‘Renters Reform Bill’, encompassing the above proposals, in 2023.

-----------------------------------------article 2-below are our extracts-------------------------------

UK faces longest recession since records began, Bank of England says

Karen Gilchrist NOV 3 2022

KEY POINTS
  • The Bank of England said Thursday that the U.K. is facing its longest recession since records began.
  • The central bank described the outlook for Britain’s economy as “very challenging,” noting that unemployment would likely double during the country’s two-year slump.
  • The BOE raised interest rates by an historic 75 basis points Thursday, its largest hike in 33 years.

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