Neath Home Buyers £512,300 Windfall as Land Transaction Tax Holiday Stretched to June…

…and new 5% deposit mortgages for Neath first-time buyers

The Welsh Assembly followed suit a few days ago as Chancellor Rishi Sunak announced two initiatives to keep the British property market firing on all cylinders into 2021.

The Welsh Assembly has announced they will extend the Land Transaction Tax holiday until the end of June. Secondly, Mr Sunak announced a scheme that will allow Neath first-time buyers to buy their Neath home with 5% deposits from this April. Let me look at what each initiative means to the Neath property market.

  1. Land Transaction Tax Holiday extension for Neath home buyers

Coming out of the first lock-down in the early Summer of 2020, there was a lot of apprehension that the British property market would flounder. Therefore, when the Land Transaction Tax Holiday was announced back in July 2020 to boost the property market, the deadline was set at the 31st March 2021.  Little did anyone know of the snowball effect of people wanting to move because of initial lock-down in the Spring of 2020, the pent-up demand following the conclusion of the EU negotiations with the subsequent ‘Boris Bounce’ and then the Land Transaction Tax Holiday made the perfect storm for what has been the busiest property market in NEATH since the 2001/2.

The average Land Transaction Tax paid by aNeath semi-detached and detached homebuyer is £2,755

The reason the Land Transaction Tax extension is important is that many Estate Agents and Solicitors have been warning for the last couple of months that home buyers would pull out of property deals or renegotiate if they could not complete their sale in time before the Land Transaction Tax holiday ended.

So, by phasing down the Land Transaction Tax Holiday, this will allow some breathing space for burdened solicitors and mortgage lenders, thus decreasing the number of buyers pulling out of their property purchase because they unexpectedly have to find up to and extra £15,000 in Stamp Suty when property sales do not complete on time.

There are currently 287 semi-detached & detached properties that are sold stc in Neath alone and the vast majority of those will save money on their Land Transaction Tax because of this extension.

So, what does the Land Transaction Tax extension mean for Neath house prices?

The extension has heightened confidence in the Neath property market. The Government watchdog ‘The Office for Budget Responsibility’, has predicted that house prices in 4 years’ time will be just over 13% higher, compared to their predicted figure (over the same time frame) of 11% growth just before Christmas.

  • 5% deposit mortgages for Neath first-time buyers

From next month, Neath first-time buyers will be able to buy Neath homes worth up to £600,000 with a 5% deposit and a Government-backed mortgage with a fixed rate of up to 5 years

Rishi Sunak wants to turn the millennial ‘Generation Renters’ into ‘Generation Buyers’ and believes this initiative should be able to help two million people get on the property ladder. When we look at what that would mean for Neath, I estimate

1,478 Neath people could be helped onto the Neath property ladder with these 5% deposit mortgages

The Government-backed scheme will be open to Neath first time buyers for 21 months (until the end of 2022) and available from lenders including NatWest, Lloyds and HSBC (plus others to be announced soon). It will be available on all Neath homes new or second hand (previous schemes applied to new homes only).

5% deposit mortgages were all but withdrawn from the market at the start of the pandemic in Spring 2020 with an almost default minimum deposit of 10% (even as high as 15% in the Autumn just gone) putting homeownership out of reach for all but the wealthiest Neath first time buyers.

I must admit I found it a scandal that homeownership among the 25- to 34-year-olds plummeted from 69% in 1981 to 36% by 2014, although with certain Government incentives and low-interest rates since then, that had risen to 41% by last year, but it’s not enough

With so many young families paying huge sums in rent, who could effortlessly afford to make mortgage repayments on the same property, they haven’t been able to save enough for a 10% initial mortgage deposit, let alone 15%.

Yet now with these new 5% deposit mortgages, many Neath first-time buyers will be able to afford to buy their first home in Neath. Banks will typically lend between four and a half and five times the gross annual income – this means with a modest 5% deposit, many Neath 20 and 30 somethings will now be able to buy their first home. Just before I finish this topic, the 5% deposit mortgages will also be available to current Neath homeowners who don’t have the equity built up in their existing home – thus helping second or third (or more) time Neath buyers as well.

How both these changes affect Neath buy-to-let landlords?

I know many of you Neath landlords are adding to your Neath rental portfolio because of the Land Transaction Tax Holiday and with the extension, you too will save some money from it. The issue of first-time buyer mortgages does mean the demand for private rented accommodation in Neath might not be as strong in the coming decade.

Don’t get me wrong, tenant demand will continue to outstrip supply of Neath rental properties for the foreseeable future, yet the tenant/landlord balance could alter slightly in the medium term. Neath landlords need to take a long hard look at their properties and ascertain if they are fit for purpose both now and into the 2030s. Tenants are becoming a lot more demanding of what their rental property offers. Wood chip wallpaper, avocado green bathroom suites and kitchens fitted in the 1990s (or before) simply won’t cut the mustard in the next decade.

The demand from Neath tenants for properties with larger gardens, or the ability to keep pets or an extra reception room / garden office to allow them to enjoy their rented home more and also being able to work from home will ensure greater demand for your rental property …. and the best bit, they will pay handsomely for that in higher rent.

If you are a Neath homeowner, buyer, tenant or landlord and you want to discuss your options on selling, buying or renting a property in Neath and the surrounding areas, do not hesitate to contact us on 03300 563 555.

Leave a Reply

Your email address will not be published. Required fields are marked *