WEBSITE MARKET REPORT
SUMMER 2010

Dudley and Katherine Singleton of Dudley Singleton & Daughter of Pangbourne and London, looking to the strength of the property market this summer and find we are still ducking the bullets of uncertainty and lack of confidence that continue to fly. The Con-Lib coalition certainly has not helped the mending process for confidence.

The Budget austerity measures were hardly unexpected and after the black depression period of 2008/2009, the green shoots of recovery are growing and the positive steps by this government to enhance that recovery must be considered huge plus points.

The CGT rise was less painful than expected and I suspect a short-term surge in second home purchasers will come about. The heavily whispered warnings from the government were always going to make CGT the headline story from this Budget, but in fact the reality today of 28% for higher rate tax payers is no big issue for the residential housing market. The CGT rise coming into effect overnight will certainly not engender a dramatic sell off of second homes or investment properties. The new rates, as I remember, appear to take us back to a level last seen under the pre-2008 rules where taper relief enabled a 40% headline rate of CGT to be reduced to 24%. With higher rate CGT at 28% there is strong argument for property investment and capital gains will compare very favourably with income tax at 40%. Dudley Singleton & Daughter have found that the second hand home market is still very strong.

The Chinese whispers and jungle drum rumours which abounded in May did have the effect of stalling the residential house market, but it is the opinion of many experts that now the demons have been faced and a Budget made, it may well kick back into life quite fast.

Dudley Singleton & Daughter have certainly found the amount of calls made for valuations have dramatically increased since the Chancellor finished his speech and sat down.

There is always, as ever, a sting in the tail in these sort of taxation alterations for basic rate tax payers; an individual's capital gain will be added to their income and the Inland Revenue will assess whether or not this individual remains as a basic rate tax payer for the purposes of CGT and an investor whose combination income and gains approach £44,000 will then become liable to pay 28% rather than 18% CGT.

But what is most important, it appears that the Bank of England are likely to maintain a rather flexible monetary policy well into 2011, maybe 2012; this requirement to offset fiscal tightening through monetary policy could allow interest rates at present levels and continue for considerably longer than was previously thought possible. This position will do a lot to underpin house prices and may well also be a strong factor to on-going low supply to the market place as owners under pressure will be bolstered up, protected if you like, by the low mortgage payments.

The rather direct approach that has been taken with the CGT without the need to reintroduce taper relief and indexation is giving a welcome blue-sky effect to perhaps the beginning or, indeed, a return to tax simplification.

It was thought by many that there was going to be a significant risk to the residential housing market in the UK created by the austerity measures introduced by the Chancellor in this last Budget; the reality in the grey light of dawn and hopefully the beginning of a new day for us all is that the changes announced seem to be carefully looked at and considered before implementation and I believe will serve to underpin the market, rather than detrimentally effect it as was feared.

.