SELLING
Russell Hunt
MANAGING DIRECTOR
AT PROPERTY HUNT
Q. Dear Russell, has the abolition of home information packs (Hips) helped the London property market?
A.I think that the removal of Hips has definitely been a positive thing because people just don’t like putting their hands in their pockets and paying for something up-front with no guarantee of a sale.
Since they have been abolished, a lot of sellers are able test the water and see what interest there is in their property without actually having to pay around £200 to get the Hip completed.
Previously, an estate agent could not legally market a property until the Hip had been set up. This put off sellers who wanted to market their property quietly.
Now people don’t have to fully market the property if they don’t want to and can ask the estate agent to show round just a few serious buyers and see what happens. The estate agent also does not have to produce the full brochure now.
A lot of overseas sellers didn’t like paying for HIPs upfront because they didn’t understand the reasoning for it. Now that Hips are no longer required, they are keener to sell their London properties.
Overall, their removal has freed up the market and more vendors are inclined to put their properties up for sale – there is still a demand for good properties and especially so in London.
This influx of properties also helps buyers because they now have more to choose from and can negotiate better whereas before they didn’t have any choice.
Q. Dear Russell, I am looking to invest in property in London. Should I be concerned about fluctuating CGT rates?
A.People have very short-term memories – it is only a few of years ago that the capital gains tax (CGT) rate was at 40 per cent. It then fell to 18 per cent under the Labour government and is now standing at 28 per cent for high-income earners.
CGT goes up and down a lot of the time and property investors should be looking at the long-term investment horizon rather than worrying too much about changes to tax that may not last that long anyway.
If you are holding your investment properties for the long-term, then you do need to consider what the CGT rate is, but only at the time you want to sell. If you are a sophisticated professional investor and know what you are doing, then CGT is not going to worry you too much because you have a long-term goal and the current rate may well have changed again by the time you come to sell.
The amateur investor, however, will probably be a bit more concerned and become more cautious. But the rate hike was not as big as people had feared, so while there might have been some short-term panic, you should remember that you are looking to invest over a reasonably long time-frame term, and the odds are that the rate of CGT won’t make much difference to the profit that you will make. And anyway, with the rate changing regularly, it’s not something you can predict and so it’s not worth worrying about. Far more important to your returns are the rental return, the service charge and the problem of short leases.
Russell Hunt is managing director of Property Hunt, a search agent for London and the Home Counties. @propertyhunting
www.property-hunt.co.uk