Property Moose explains how the 2015 UK Budget will affect the property market.
Just before polling stations opened in May, Chancellor George Osborne released an electioneering laced 2015 Budget after an address from the House of Lords. Osborne announced that £100 million would be invested into driverless technology, a penny would be removed from Beer Duty and a planned rise for Fuel Duty would be cancelled. Here at Property Moose HQ we were most interested to know how some of Osborne’s announcements will affect the Property Market.
“Britain is Working Again”
In the words of the Chancellor, “Britain is working again,”(1) as unemployment has dropped by 100,000 since October 2014. Increased availability of jobs and a greater working population is fantastic news for the UK property market, as the general public are able to invest more in rent and mortgages.
Many of our investments are located in the North West where the Budget announced that employment rate is growing more rapidly than any other region.(2)
The success of the North West hasn’t gone unnoticed by the Government, leading to the decision to invest £11 million into the technology sector in Greater Manchester, Leeds and Sheffield(3). This positive news should encourage the property investors to consider seeking investment property up North.
Help To Buy ISAs
The government has launched The Help to Buy scheme, which aims to help first time buyers save up for a home. The scheme is an ISA that gives £50 every month to a prospective buyer, limited to £3,000, as long as £200 is deposited into their savings account(4). A first time buyer who, for example, saves £12,000 and meets the requirements, would have their money increased to £15,000.
Though a helping hand for people to buy property is a positive for the market, it would take 5 years to save a 10% deposit on a property valued at £150,000. Savers may consider creating a diversified portfolio of investment through some of the alternative investing techniques such as Property Moose, Seedrs or Nutmeg. Saving in an ISA may be secure but by using savings wisely, individuals can invest across a broad spectrum of property, business and investment management products. It may involve more risk, but they may even make the same amount of money in much less time. Rather than being encouraged to save, people are being encouraged to invest in products such as ISAs and make their money work harder.
Maike Currie, an Investment Director at Fidelity Personal Investing, also showed concerns at the scheme, “Given record low rates, any bank offering the Isa is unlikely to pay you large interest returns. In five years’ time, house prices will already have moved on significantly.”(5)
“What George Osborne has effectively done is add some extra layers of complication to this savings vehicle, with few real benefits.”(6)
Annuity Concerns Answered
From April, the Pension Freedom scheme took effect, and anyone over 55 will have complete access to their pension savings. When this was announced, those who had purchased annuities were concerned that they had lost out.(7)
The new Budget has responded to the annuity worries by letting those that missed out on pension freedom to sell their annuity. The freedom and annuity buy back makes a huge amount of money available to pensioners. Instead of letting the money sit in their bank accounts many are looking to use it as an investment. It is forecast that the property market could see a huge influx of over 55s investing in buy to let property.(8)
The 2015 Budget for the most part has been popular, but as a pre-election publication, the Government may have been looking to please as many voters as possible.
That said, if executed now in power once again, the budget may create a steady investing sector, helping business and entrepreneurialism to thrive, and the property market to grow.
Disclaimer and Legals
Property Moose does not provide any advice in relation to investments and you must rely on your own due diligence before investing. Please remember that property prices can go down as well as up and that all figures, rates and yields are projections only and should not be relied on. If in doubt, please seek the advice of a financial adviser. Your Capital is at risk if you invest. This post has been approved as a financial promotion by Resolution Compliance Limited.
Property Moose is a trading name of Crowd Fin Limited which is an Appointed Representative of Resolution Compliance Limited which is authorised and regulated by the Financial Conduct Authority (no: 574048).
Sources
- http://video.cnbc.com/gallery/?video=3000362712
- http://www.newstatesman.com/politics/2013/03/george-osbornes-budget-speech-full-text
- http://www.manchestereveningnews.co.uk/business/government-inject-4m-tech-incubator-8869007
- http://www.telegraph.co.uk/finance/budget/11481174/New-Help-to-Buy-Isas-for-first-time-buyers-unveiled-in-Budget.html
- https://www.fidelity.co.uk/investor/markets-insights/daily-investment-insight/details.page?whereParameter=daily-investment-insight/isas-and-sipp-all-change
- http://uk.finance.qa2p.global.media.yahoo.com/news/budget-changes-means-bad-news-102944959.html
- http://www.thisismoney.co.uk/money/article-2927001/Pension-firms-told-alert-people-pitfalls-freedom-reforms.html
- http://www.jamessellicks.com/blog/pension-rule-change-whats-the-situation/
