How do you see your home? To many it is just a debt trap that has sucked up too much cash as equity. Property does not behave like any stock or financial instrument – its unpredictability can create distrust and even fear.
Any local oligarchs buying their £5m mansion will have to cough up £513,000 of Stamp Duty Land Tax (SDLT), plus around £20,000 of extra costs. And if one is having to leverage with a loan-to-value of 75/25, that is almost £1.8m of hard earned wedge that could potentially go up the Swannee.
There are no financial instruments or stocks anywhere in the world with such an onerous buying cost as our new highest band of stamp duty. There is the buying / selling ‘spread’ however, and maybe we need to take this into consideration. A yield can be earned through rental, but with capital values where they are in relation to the rents, yields are topping out currently at 3% max. Unlike other financial investments, you can live within a bricks-and- mortar investment, and this is what sets property apart from anything else.
Owners want to predict the behaviour of the market but the model is now so macro that it is impossible to say. Property ‘experts’ can share their vision of the future, but more often than not they are completely wrong. It is almost impossible to give an exact picture of where the property market is at any one stage. Local markets invariably differ from the national picture. The investor market reacts differently to the usual residential market and the various property price bandings all have their own and completely unique behavioural patterns. Even estate agents giving market appraisals to potential sellers illustrate the lack of clarity, with an often vast and varied spread in pricing.
The Chancellor’s SDLT policy makes the possibility of staying in the same home for longer much more likely. So my advice would be to get comfortable.