Should I Purchase Completed Developments to Beat the Stamp Duty Increase?

So the big questions today we are asking is that is it advantageous to buy a ready now apartment over an off-plan apartment due to the stamp duty holiday.

We are also going to delve into what we expect to happen after the Stamp Duty holiday ends. Will prices continue to rise or will they start to stutter.

So let’s talk about the Stamp Duty holiday and what does it mean in real terms to each purchaser.

Property Price Old Rate New Rate Saving
£150,000.00 £5,000.00 £4,500.00 £500.00
£250,000.00 £10,000.00 £7,500.00 £2,500.00
£300,000.00 £14,000.00 £9,000.00 £5,000.00
£400,000.00 £22,000.00 £12,000.00 £10,000.00
£500,000.00 £30,000.00 £15,000.00 £15,000.00

So as you can see from the table if you are investing at the top end of the stamp duty holiday bracket there are good savings to be made. However, our advice would be that you do not need to be investing at the 500k mark to get a great buy to let, You are better doing 2 at the £250 mark as typically the rental yields work out far greater.

But even on the £250,000 mark, there is still a £2,500 saving on each property to be had. So now the question to ask is that if it is worth making a purchase on a ready now property or still waiting for an off-plan unit.

Unfortunately, this is not as simple as yes or no. It all depends on what you purchased the property for at the start. For example, if you purchase at market value then more than likely the answer is yes, it is worth getting something that is ready now. However, if you are purchasing £10,000 below market value and you are only saving £2,500 on Stamp then there is no reason to beat the cut off point.

However, where it does get interesting is if we can combine a number of factors. So many developers were willing to put offers on during the height of COVID when the Lockdown was in full operation. However, we are seeing those same developers realize that the slowdown in sales was short-lived and the increase in activity after lockdown has been so dramatic that developers have withdrawn all offers and increased the prices of their developments. If we take St Anne’s as an example, we had a chance of getting 2 beds at the £166k mark, we are now looking at. over £180k for the same unit.

We then have to ask ourselves what is the best opportunity, well that in an ideal world is one we can get for below market value (thus essentially getting a discount as we do on off-plan property), ready now, therefore, beating stamp duty holiday end, tenanted, therefore generating an immediate income, city centre.

Now these are harder to find especially when the market is increasing to record highs but they are out there.

Before we come to those opportunities we need to discuss property prices, will they fall, will they keep rising and what is likely to happen after the Stamp Duty holiday finishes.

So let’s wind back to Lockdown when there were a number of outlandish predictions in regards to the housing market. You can see a few here.

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During this time we hosted a webinar in regards to our predictions, we didn’t buy into this that the property prices would fall and actually stated that they would increase due to more money in clients pockets and more demand, and that is exactly what they have done.

You can check that webinar here.

https://www.flambardwilliams.co.uk/how-will-the-coronavirus-affect-the-property-market/

However, in regards to the reduction in price we do feel that the run-down outskirts of cities is where we are going to see the majority of house price falls and huge tenancy void periods.

The main reason for this is all to do with what part of the economy is/will be affected by COVID. It is more likely that the hospitality and leisure industry will be affected so think about waitresses/waiters/barristers in local coffee shops. In workplaces such as offices where there are swathes of personnel working from home you will find receptionists for example are not in as much demand. We then have to look at typically where these tenants would live, more than likely they will be living on the outskirts of the city in cheaper accommodation or houseshares and this is why we feel the outskirts of cities will suffer the most whilst the majority of city centres still have a great demand for quality rental properties.

The only city that bucks this trend is London as more and more residents look for more outdoor space as they don’t have to commute.

Now we come onto the opportunities.

Location

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Actual Properties

Regency House

Rental Examples

https://www.rightmove.co.uk/properties/93310541#/

Purchase Examples

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Vulcan Mill

Purchase Examples

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Rental Examples
You can see how quick a let has been agreed in the development. The following was added on the 10th September and already let.
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