For those of you who were not glued to your media channel of choice yesterday as UK Chancellor Alistair Darling announced his last pre-election budget, we have trawled through the numerous reports and ask “What has he ever done for us?” in a bid to find out how, who and if anyone stands to make any significant gains or losses in the world of property investment.
The rate of capital gains tax remains at 18 per cent, which whilst this isn’t an increase or cost to anyone. However, the soon to be introduced 50 per cent top rate of tax will undoubtedly increase demand for more sedate capital growth investments.
The Chancellor announced “The Government intends to legislate in a Finance Bill to be introduced as soon as possible in the next Parliament, to allow real estate investment trusts (REITs) to issue stock dividends in lieu of cash dividends in meeting the requirement to distribute 90% of the profits from the REIT's property rental business.”
The results of this in essence are to increase actual cash flow within real estate investment trusts to make them more liquid and enable further investment. By being able to issue dividends in the form of stock (shares) in themselves, as well handing out cash, it means the trusts are able to reinvest that cash back into more investments. By allowing this in the bigger picture it means that there is theoretically more large scale investment going on. Arguably this can be seen in two ways, one to fudge the “new money” investment figures and make the Government look a little shinier by boosting the numbers, the other is that there just isn’t the cash flow there anyway, so they have no choice. All in all, if you are personally invested in a REIT right now, provided you are in for the long term, it should be a positive result. As for the short term, the change is unlikely to benefit the individual significantly.
The Stamp Duty limit for first-time buyers was doubled to £250,000, giving first time buyers a break. Great news for those trying to get their foot on the property ladder.
Stamp Duty on residential properties costing over £1 million though has seen the introduction of a 5 per cent rate. Not so great for those falling into this bracket.
On the whole, there seems to be little significant effect on property investors, with some impact for homeowners, both positive and negative. As usual, the budget itself has created an enormous amount of hype and interest, causing many to refrain or hold back from making investment decisions. Has there been any gain by holding back? For the first time buyer? Yes. Everyone else? Not in the slightest.
It goes to show that watching and waiting doesn’t make money. What gets decided in the bigger picture will happen regardless of whether you wait or not.
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- Thursday 25 March 2010