Coalition Plans for the Housing Market

The Decision yesterday to suspend HIP’s can only improve the entire process of home buying and selling. The Home Information Packs have been unnecessary and expensive, hindering an already fragile housing market.

These packs were never in the interest of the consumer. In suspending HIPss the total cost of selling a home will lower, and a pointless regulation will be removed from the buying process.

Home Sellers will still need an energy performance certificate, before marketing their home.

The decision is unlikely to be popular with thousands of people who retrained as home inspectors to provide the packs as they are likely to lose their jobs.

The coalition Government have also revealed plans to raise Capital Gains Tax, they have revealed that tax would be raised on non-business assets to rates “similar or close to those applied to income.” This will affect, among others, second-home owners and buy-to-let landlords, providers of first homes to three million people.

It is feared that this could cause investors to sell off their shares and their second homes.

Two years ago, Alistair Darling simplified CGT by axing various reliefs in return for a low flat rate of 18%. We are now returning to the pre-2008 system, with rates of 20 %, 40 % and 50%.

This bitter pill could be sweetened with the government bringing back taper relief, a scheme that will reward long term ownership by gradually reducing the tax on assets owned for three years or more before sale.

The finer details are to be revealed in the emergency budget on June 22. It is thought that these changes may be implemented from April 6th 2011, the start of the new tax year.

At present there is stamp duty relief for first time buyers purchasing properties up to £250,000. The Conservative manifesto promised to keep this proposal introduced by labour in March.

There are certain criteria that need to be met before a buyer can be considered eligible. The buyer (buyers if a joint venture) must not have previously owned a property anywhere, here or abroad.

If a partner has previously owned a property and the other has not, that couple would still not be entitled to stamp duty relief.

The property must be the buyer’s one and only home, thus buy-to-let investors will not qualify for this relief.

Gifted or inherited property owners would also be excluded from this tax relief. Lawyers and tax experts believe that this relief will be very difficult to police. The onus is on the buyer to declare that they have not been previous property owners.

Now is the time for more consistent, innovative long-term policies on housing and for the Government to listen to, and take advice from, people within the industry before bringing out ill-thought out initiatives, the HIPs being an example of this.

It will be interesting to see what the coalition government will bring forward in this respect.

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