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Councils spend £3.8bn on commercial property, study reveals

Local authorities spent nearly £4bn on commercial property assets in recent years, a new study into the issues facing the UK’s town centres has revealed.

Carter Jonas, a national property consultancy, and Revo, a national membership organisation for retail property and placemaking, have carried out a detailed study into the challenges and issues facing high streets. The research found councils spent around £3.8bn on commercial property assets between 2013-17, with Spelthorne Borough Council, spending £477.1m, coming out on top as the biggest local authority investor.

Nearly half of the £3.8bn was spent on the acquisition of office space. Retail, including shopping centres and retail warehouses, accounted for nearly £1.2bn of spend.

The remaining investment was split between industrial (£500m), mixed-use (£100m) and leisure (£80m) with a small amount diverted to other alternatives.

The researchers also surveyed members of the public and private sector to identify the issues most affecting high streets.

Online shopping was identified by 28.4% of respondents as the biggest challenge for town centre businesses. Business rates (13.6%) and reduced demand for space from retailers (13.6%) were also singled out.

Over half of the respondents (53.1%) said investment in the public realm was the most important initiative for delivering town centre regeneration.

Nearly half agreed strengthening local and national town centre first policies and reducing business rates were also critical.

Dr Steve Norris, head of Regeneration, Retail and Town Centre Consultancy, Carter Jonas, commented: ‘The scale of local authority investment in commercial property assets can in part be attributed to the availability of affordable credit, but is fundamentally born out of a deep desire to protect and improve the UK’s struggling town centres.

‘However, the acquisition of these assets is only the first step and they need to form part of a broader masterplan or regeneration vision to ensure the investment potential is fully realised and deliver long term social benefits.

‘The challenges facing the UK’s town centres and high streets are well documented, but we have embarked on this comprehensive study with Revo to identify a series of workable solutions that can be put into practice to halt the decline.

‘Our research reveals that over 66% of respondents still see joint ventures partnerships as the preferred funding models for regeneration projects, so we hope to ignite fresh dialogue between the public and private sector to unlock new opportunities.’

‘This joint research between Revo and Carter Jonas underlines that councils have emerged as significant owners of commercial property,’ said Ed Cooke, chief executive at Revo.

‘Owning commercial property not only generates long-term income for the local authority, it enables them to play a more active role in reshaping their urban environment to ensure they remain the heart of communities.

‘Since 2012 we have been involved in the Government’s Future High Street Forum, which has identified fragmented ownership and a lack of co-ordination amongst stakeholders as a major obstacle to reinvention.

‘We therefore welcome this positive intervention from councils but given the pace of change in the retail sector in particular, it is imperative that the public sector draws on the expertise and resource available in the private sector to manage and re-position these assets, so they remain relevant, vibrant and income-producing.

‘Indeed, the future success of the UK’s urban environments relies on better collaboration between the public and private sectors, and we will continue to play a lead role in bringing the two together.’

Source: Local Gov

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Landlords reshape portfolios as tax changes start to bite

Landlords have been reshaping their portfolios as tax changes start to bite.

Paragon’s latest research into trends in the private-rented sector found the proportion of landlords who own between six and 20 properties had increased from 35 per cent to 39 per cent.

The research, which was based on interviews with 203 experienced landlords in the first quarter of 2018, also found a drop in the proportion of landlords in the three-to-five property bracket.

This group was down from 26 per cent to 24 per cent and Paragon said this indicated a growing polarisation between small-scale landlords and those with more substantial portfolios.

John Heron, managing director of mortgages at Paragon, said portfolio resizing appeared to be one of a variety of tactics being used to adapt to regulatory and fiscal changes in the buy-to-let sector, with reductions in portfolio gearing and rent increases also playing an important role.

He added: “Our latest survey demonstrates how tax and regulatory changes are beginning to drive changes in landlord behaviour, with evidence of polarisation between small landlords and those with more substantial portfolios beginning to emerge.

“Our own experience highlights that landlords with larger portfolios need access to products that cater for landlords with more complex requirements and broader underwriting expertise, increasing the role for specialist lenders in the buy-to-let market.”

Landlords at the top end have also been resizing, with the survey recording a fall in landlords with more than 50 properties. This was down from 6 per cent to 4 per cent.

Average portfolio gearing, which measures the loan-to-value ratio of a property portfolio, reduced from 35 per cent to 32 per cent compared with three months ago – falling from a peak of 43 per cent  in 2012 to hit its lowest level since Paragon’s survey began in 2001.

Meanwhile 24 per cent of landlords said they had increased rent in the past three months. They also said they were spending an increased proportion of their rental income on mortgage costs, up to 30 per cent of income from 26 per cent at the end of 2017.

Daniel Hodges, mortgage adviser at Suffolk-based Just Mortgage Brokers, said: “Landlords are now starting to see the impact of the new tax changes that are gradually being implemented and in turn looking to restructure their portfolios.

“Those with the larger portfolios will continue to see property as a solid investment and although restructuring of their portfolios is on the agenda it is perhaps no surprise that this sector of the market has grown.

“Those with the smaller holding will perhaps see the tax changes as a more relevant factor in their finances and the polarisation between these groups is likely one that will continue to develop.”

Source: FT Adviser

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UK House Price Inflation Eases For Second Month

Inflation in Britain unexpectedly fell in March, official figures showed Wednesday, suggesting that the Brexit vote’s boost to prices is running its course and raising questions in financial markets as to whether the Bank of England will raise interest rates again this month.

The consumer price index in March was up 2.5% compared to the same month a year ago, the Office for National Statistics revealed on Wednesday, down from 2.7% the month before, where it was expected to stay, and the third fall since hitting a peak of 3.1% last November.

Philip Smeaton, chief investment officer at Sanlam UK, adds: “With inflation falling back towards the 2% target and wage growth overtaking inflation for the first time in more than a year, it finally looks like the squeeze on living is easing”. “This rate hike does not signal the onset of a conventional tightening cycle”.

On a monthly basis, house prices edged down 0.1 percent in February. Alcohol and tobacco taxes also didn’t increase as usual after the government changed the timing of its annual budget announcement to the autumn.

At the pumps, motorists also faced lower costs, with petrol down by 1.6p per litre on the month to 119.2p per litre and diesel falling by 1.5p to 122.9p.

Samuel Tombs, chief United Kingdom economist at Pantheon Macroeconomics, says YES. Inflation looks to be falling back as predicted, but with wages picking up and unemployment still falling, it’s possible this tightness in the labour market could eventually push inflation back up.

Given yesterday’s wage growth data, coupled with today’s inflation rate figures, it means the Bank of England is less likely to raise interest rates next month.

Both sterling and United Kingdom gilt yields have initially moved down sharply in response to the data, which are seen as weakening the case for further interest rate rises from the Bank of England (BoE).

The pound tumbled after the data, sliding 0.5% to $1.4217.

Core CPI, which excludes more volatile prices such as for fuel and food, eased down to 2.3% from 2.4%, with the market having expected a slight pick-up to 2.5%. Services inflation was just 2.5 per cent in March, and on its current trend it won’t reach its 3.5 per cent pre-recession norm, required for at-target headline inflation, for another three years.

Source: Click Lancashire

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Housing development boosted by crowdfunding efforts

A housing development in Greater Manchester has secured a cash injection of more than £1m through a crowdfunding platform.

The House Crowd was founded in 2012 by Frazer Fearnhead and Suhail Nawaz. It was the first property crowdfunding platform in the world and has helped give rise to the industry.

Over a period of 24 hours, £1.3m was raised with the majority going towards the Egyptian Mill Development in Lees, which comprises 41 houses and 15 apartments. House Crowd Developments – which is part of the House Crowd Group of companies – is behind the initiative.

The rest of the balance – £98,000 – was invested in the House Crowd’s Innovative Finance ISA, which allows individuals to use their annual ISA allowance to lend funds through property investment, while receiving the benefits of tax-free interest.

Fearnhead said: “Raising £1m in a single day is not just a confidence boost for The House Crowd and the service that we offer, but also for housing developments in the North West. The numbers don’t lie – there is clearly a big appetite amongst retail investors for property development financing and peer to peer secured lending, which is exactly what we offer.

“It’s important that we keep up this momentum to continue helping solve two of the major problems within our society – the lack of quality housing and people’s difficulties in saving their money.

“If we can continue building much needed housing, whilst providing our members with a reliable way to build a nest egg for their retirement, then we are serving our purpose.”

Source: Insider Media

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Time to think small if the government is serious about solving the UK’s housing crisis

You can forget trying to unravel our tangled planning regime. Forget improving access to land. And forget trying to ease the squeeze on skilled construction workers.

The government shouldn’t bother with any of the above if it won’t do more to help homebuilders secure funding to get projects off the ground in the first place.

This is a funding void that has drastically shrunk the number of small housebuilders in the UK.

In fact, if you hark to 1988 – which was the most productive housebuilding period in British history – there were 12,200 small builders in the UK. By 2014 (the latest figure available), the number dropped to 2,400, which is a decline of 80 per cent.

And when you look at the largest 10 housebuilders in the country, not a single one was founded after 1990.

Of course, the dire lack of housebuilders only serves to exacerbate the country’s supply crisis.

“Solving the nation’s housing crisis is as complex as it is urgent.” Those are the words of the UK’s former housing minister Mark Prisk in a yet unpublished report from LendInvest called Putting Finance First.

While Prisk says we can’t point blame for our dysfunctional housing market in one direction, it’s clear that finance is a major prong in this multifaceted problem.

Lack of funds is certainly a huge stumbling block for smaller players in the property market.

SME housebuilders, of course, can help develop affordable homes – whether that’s through mixed method property, modular homes, or fully-customisable residencies, says Jon Hall, managing director at challenger bank Masthaven.

“These small to medium sized businesses could well mark a turning point, if not the answer, to the UK’s housing woes,” he adds.

But more than half of small builders say the major hurdle is getting enough money together to get projects rolling, according to the Federation of Master Builders.

“The problem is that the loans available to these businesses often aren’t adequate enough to meet their needs,” says Hall. “At the same time, many of these companies are snubbed by high street lenders.”

As a result, he warns that many SMEs seek out other sources of finance, sometimes winding up with outdated products and high interest payments – or else companies turn to complex development finance loans.

Admittedly, there is a £2.5bn government initiative in place – known as the Home Building Fund – which offers finance to home building SMEs in England. But whether that money is being put to good use is another question entirely.

Research from LendInvest indicates that this initiative has financed 153 schemes, delivering 88,000 homes to date. But, 18 months since its launch, it’s not clear how much of this fund has actually been deployed to developers, with no data published from any authority on the performance of the loans either.

It’s a strange dichotomy – the government pledges to build more houses, but how does it expect this to happen without improving access to funding? As LendInvest points out, it cannot be left to the largest housebuilders to solve the housing shortage.

Chief executive Christian Faes says the only way to increase supply is by helping property entrepreneurs raise capital, leveraging both private and public sector investment.

SMEs are currently locked out of the housing market, but specialist lenders have the key to let them in

The big banks have been edging away from smaller businesses for years, so it’s not exactly news that SMEs across all sectors have been struggling to find finance. But the problem is arguably worse for property SMEs, which are held back by regulatory challenges, and are not eligible for the same tax breaks available to small businesses in other industries.

Also consider that the UK has the highest property taxes in the developed world, meaning many small builders are priced out of the market.

The good news is that specialist lenders can help solve the ongoing housing crisis. “If the government wants to hit its target of building one million new homes by 2022, SMEs will need to work with lenders that can provide a range of innovative loans,” says the Masthaven boss.

Hall points out that challenger banks can provide up to 100 per cent of build costs funded in arrears, and maximum loans to GDV at 60 per cent. “SMEs are currently locked out of the housing market, but specialist lenders have the key to let them in,” he adds.

Experienced lending businesses could even act as intermediaries to assess the creditworthiness of borrowers and allocate government funding, speeding up the process as a result.

This was actually a key recommendation in the 2016 Tailored Review of the Homes and Communities Agency – although LendInvest says this has not happened anywhere near as extensively as the industry would like to see.

To date, Homes England has only officially appointed one commercial partner, which suggests that the government body is failing to make use of the full scope of specialist lenders – companies which could go a long way to propping up thousands of SME housebuilders.

LendInvest questions why Homes England does not use a model similar to state-owned bodies like the British Business Bank (BBB) by making full use of the network of commercial partners.

The government has no hope of hitting its ambitious housebuilding targets unless it encourages a new generation of entrepreneurs in this sector

But what about getting local councils involved?

LendInvest suggests local authorities co-invest with alternative lenders in local developments, using a mechanism known as the Public Works Loan Board to offer discounted capital to small builders.

But the collaboration doesn’t end there, as LendInvest reckons more funding from the BBB could be allocated into the property sector.

“Until recently, the property market has been an untapped and overlooked market for BBB, which has focused on providing finance solutions for SMEs in almost all other markets across the UK economy,” the report reads.

It suggests that the BBB appoint more alternative lenders to underwrite property investment and development loans as part of its Enable Guarantee programme.

Essentially, the government has no hope of hitting its ambitious housebuilding targets unless it encourages a new generation of entrepreneurs in this sector. Finance is the biggest barrier preventing this, but specialist lenders cannot do this without collaboration from the state.

If the government is serious about solving the housing crisis, it’s got to think outside of the box, offering the alternative routes which our property market so desperately needs.

Source: City A.M.

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House purchases at start of year best for a decade

Homeowner purchases in February reached their highest level for that month since 2007, according to UK Finance.

According to the trade body’s latest mortgage trends report there were 50,000 purchases in February 2018, when home movers and first-time buyers are combined.

The growth came from first-time buyers, with 25,200 of these mortgages completed in February 2018, which is 2.4 per cent more than in the same month a year earlier.

Meanwhile home mover mortgages remained flat at 24,800.

Jackie Bennett, director of mortgages at UK Finance, said: “Homebuyers have shaken off the winter blues, with purchases by first-time buyers and home movers reaching their highest levels for February in over a decade.

“Remortgages are also up year-on-year, as homeowners look to fix costs amid anticipation of further interest rate rises.

“Meanwhile the buy-to-let (BTL) market continues to operate at stable but subdued levels, due in part to the impact of recent legislative and tax changes.”

Both average loan-to-value and loan-to-income multiple have remained stable over recent months for home movers and first-time buyers.

The average loan-to-value and loan-to-income multiple for first-time buyers in February was 84.3 per cent and 3.59 respectively while for home movers they were 72.3 per cent and 3.41.

Average loan sizes have increased for both types of buyer as house prices have increased, reaching £138,150 for first-time buyers and £179,800 for home movers.

There were also 35,400 homeowner remortgages completed in February, which was 11.3 per cent more than in February a year earlier. The £6bn of remortgaging in the month was 11.1 per cent more year-on-year.

But buy-to-let home purchase mortgages fell by 8.8 per cent, with 5,200 mortgages completed in the month.

There were also 14,100 buy-to-let remortgages completed in February, which was 20.5 per cent more than in the same month a year earlier.

Jeremy Leaf, north London estate agent and a former RICS residential chairman, said: “Buyers and sellers are showing, once again, that those prepared to negotiate hard are still getting on with their lives, albeit at slightly softer price levels.

“Encouragingly, first-time buyers are taking advantage of the abolition of stamp duty announced at the end of 2017, as well as a more level playing field with buy-to-let investors, with the latter’s numbers noticeably shrinking as revealed in this report.

“Although it is sometimes tough for first-time buyers, many are showing that they would prefer to buy rather than rent, although clearly many have no option unless they have help from the Bank of Mum and Dad.

“Looking forward, we expect more of the same – no boom or bust but a steady market with realistic pricing.”

Source: FT Adviser

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The Crowdfunding Trend – Threat or Opportunity?

Crowdfunding was previously only an approach for start-ups to get up on their feet, but the method is now showing potential for established companies to shift their strategy and encourage positive and profitable change. Lauren Razavi analyses the potential of crowdfunding as both a disruptive threat and an opportunity for established companies.

Crowdfunding has been gaining more and more ground in recent years, especially among European consumers. It might seem like a trend embraced only by start-ups desperate for cash, but in reality crowdfunding is quickly becoming a useful tool to recruit and maintain an enthusiastic client base for companies across multiple industries.

We live in a world in which failure to adapt to technological advances can spell destruction for a company. But is crowdfunding a dangerous threat that start-ups will use to disrupt industry, or an opportunity for established players to make profitable changes to their process?

Alternative Finance 101

A report by CrowdfundingHub.eu identified four major types of crowdfunding:

  • Donation Based crowdfunding relies on the charity of the customer base, with little to no anticipated reward. The biggest risk is that the company won’t raise the funds they need to deliver on their promises – in which case, they are responsible for either returning the donations or funnelling them into an acceptable project.
  • Reward Based crowdfunding provides security to the investor by giving them a sample of the finished product. This will satisfy most consumers, who aren’t looking for a share of the profits but simply to support an idea they find compelling. However, this type of crowdfunding requires the company to actually have a sample product they can ship, which means that the initial funds will have to come from another source.
  • Equity Based crowdfunding is similar to traditional investment methods in that the backer will receive a stake in the company, and possibly even some control over the final product. The primary issue with this type of crowdfunding is that in Europe the company will be subject to the regulations and policies of the European Banking Authority.
  • Peer-to-Peer Lending is also similar to traditional financing – the backer will provide funds on the understanding that those funds will be paid back with interest at some point in the future. In some countries such as Italy and Belgium, peer-to-peer lending is prohibited, and there are various other restrictions in place across Europe.Each type of crowdfunding has its own pros and cons, but a major advantage of all of them is that they are more accessible to less established companies who may not be able to guarantee a consistent return on investment.

Industry Disruption

There are some concerns that the rise of crowdfunding will cause major disruption across industries. According to the world bank, 2016 saw more money raised from crowdfunding than from venture capital.

That’s bad news for investment managers – instead of paying costly legal and management fees, big investors are now choosing to cut out the middleman and interact directly with the companies they feel best align with their interests. As more and more platforms choose to cater to specific industries, investors are better able to make decisions for themselves, instead of relying on financial experts who charge fees for their knowledge.

The unregulated nature of the crowdfunding sector is also a cause for concern. In Europe, regulators have struggled to harmonise the challenges that  crowdfunding brings with existing financial practice. In Finland, for example, there is no requirement for crowdfunders to have an MiFID licence, which means that companies who have obtained a licence are more strictly regulated than their unlicensed competitors. Other nations have been quicker to adapt – in France and the UK existing legislation has been brought smoothly up to date to be compatible with crowdfunding.

However, it can’t be denied crowdfunding is bringing in some much needed changes, especially in European markets. Traditional investors tended towards funding large, trusted companies during the financial crisis, which meant that many small to medium businesses were lagging behind in capital investment. Crowdfunding means that general consumers can now invest in local, small to medium businesses from their smartphones – and that means that those same struggling companies are able to gather the funds they need to compete in the big leagues.

Power to the People

Easy access to the internet and the simplicity of digital payment options is the driving force behind the crowdfunding boom. Europeans are demanding a more transparent financial market, and right now it seems as though crowdfunding is answering that demand. The European Crowdfunding Network hosts articles on its website guiding companies through everything from designing compelling incentives to identifying the motivations of their funders. Crowdfunding means that companies are connected to their consumer base more closely than ever. Whether that’s a curse or a blessing depends on the company’s willingness to engage with their backers.

The rise of crowdfunding presents a golden opportunity for established companies to reconnect with their audience and test the waters before fully committing to a project. Your funders will eventually become your customer base. They know exactly what they’re looking for in a project, and they are more than happy to talk about it. When you engage with your audience on this level you’re essentially bringing them on board as co-creators – and their advice can be more helpful than you’d think. Your funders might not be the most seasoned market analysts, but they can be valuable mentors and smart beta testers.

One of the major advantages is that it combines financing and marketing in one easy package. Your funders will be your biggest cheerleaders – they know every feature of your product, every drawback, every brilliant innovation. Some of them will be marketing professionals themselves. Some of them will be experts in their field who are desperate to share this helpful new tech with their colleagues. All of them will be guaranteed customers by the time your product hits the shelves.

Whether it is a threat or an opportunity for your company depends on your willingness to embrace change. Those who have so far failed to adapt to the crowdfunding trend are already suffering repercussions, but those who have taken the time to adjust their methods and bring them in line with the trend are finding that crowdfunding isn’t so scary after all – in fact, if you play your cards right, it can be an important tool for your business going forwards.

Source: Eureka

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Is this the death of buy-to-let?

In one way or another, we all participate in the property market – whether that’s as renters or owners of our homes. But for two million people, the UK property market has also been an investment vehicle of tremendous wealth generation across recent years, with buy-to-let attracting £1.4 trillion in capital.

Buy-to-let has been a national obsession. In the past, it was an investment that seemed to require little in the way of privileged financial markets insight. It was simple to understand and manage, and boasted a steady (and in many cases heady) performance record – comfortably outstripping inflation and enriching those fortunate enough to participate.

Under scrutiny, the returns for many property investments have barely compensated for the hassle

That’s not to say there were never any downsides.

The hassles of managing tenants and maintaining properties have been routinely underestimated, typically to the detriment of tenants.

And though rental incomes ought to provide steady cashflows to defray ownership costs, the reality of buy-to-let has always been closer to running a business than sitting on a hands-off yielding investment.

Under scrutiny, the returns for many property investments have barely compensated for the hassle – let alone for the risks and costs of tying up so much capital in inflexible, undiversified assets.

Pressures on buy-to-let have intensified in recent years, particularly from HMRC.

A slew of changes to tax and lending rules and the prospect of tenant-focused legislation – which appears to have cross-party political support – have made direct investment more financially unattractive.

As tax returns are filled in and re-mortgage applications processed, landlords would be remiss not to consider whether the maths on their buy-to-let properties really adds up any more.

So where does this leave would-be investors?

Buy-to-let as an investment structure may be dying, but property as an asset class remains undeniably attractive.

In fact, recent data from the Office for National Statistics revealed that almost half the population think that property is the best way to save for retirement.

Sitting somewhere between cash savings and financial markets investments, bricks and mortar has proved its value and resilience.

Taking rental yields into consideration, UK-wide property market returns have only been negative in 23 quarters since 1980, and are down more than three per cent in only five quarters.

Compare that to the FTSE, which fell nine per cent between January and March of this year.

There’s simply a difference in volatility of performance and defensiveness of the asset class that makes residential property investment attractive.

Behind the sensationalist property market headlines of late, the fact remains that there’s a shortfall of somewhere between 50,000 and 100,000 houses built per year, adding to a standing deficit of more than one million, according to Yorkshire Building Society.

People will always need somewhere to live.

So how can you invest in property more flexibly and tax-efficiently, and minimise transaction and ownership costs?

Few other assets are traded as inefficiently as property is today, but technology has been slow to transform the market’s structure despite the clear market opportunity.

Options are beginning to appear, such as peer-to-peer or equity crowdfunding platforms that specialise in – and help finance – property.

There are now opportunities to lend to property developers and buy-to-let landlords, albeit some would question how close such a debt product is to property investment at all.

For true investment in bricks and mortar, there are a host of property crowdfunding sites offering fractional ownership of individual properties, as well as platforms offering tax-efficient investments in portfolios of residential property around the UK.

Whatever tomorrow’s property investors choose, they should be careful not to throw out the “common-sense” principles that abandoned the buy-to-let market a long time ago.

These principles include diversification, using Isa and Sipp allowances where possible, and a recognition that buy-to-let investors would rather not be called about a broken boiler at 3am.

Source: City A.M.

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Property tax reform called for to fix old age renting

The government should reform the taxation of housing to prevent people from becoming “over-housed”, according to a report by the Resolution Foundation.

The think tank has published a report into the British housing market and the difficulties of buying a home faced by millennials – those born between the mid-1980s and 2000.

It found people were living in the private rented sector ever-later in life, with 1.8m families with children now renting compared to 600,000 in the early 2000s.

The Resolution Foundation estimated that on current trends, up to a third of millennials face living in the private rented sector all their lives.

To address this, the Resolution Foundation made a series of recommendations, including tax reform to make it harder to become “over-housed” – either by significantly under-occupying their home or because they own multiple properties.

It recommended maintaining the 3 per cent stamp duty surcharge for those buying a second or subsequent home, while increasing this by another 3 per cent for those buyers who are resident overseas.

Beyond this, it recommended a cut to stamp duty across the board to allow over-occupiers to downsize more easily.

The report added: “Having made it less attractive to be ‘over-housed’ – but easier through stamp duty cuts to move to a new main residence – it also makes sense to review the tax treatment of those selling second and subsequent homes.

“Under current rules, capital gains on additional properties are taxed on sale but forgiven on death.

“Requiring capital gains tax be paid on additional properties when bequeathed to anyone other than a spouse or civil partner would be a sensible step that would discourage owners holding on to additional homes until death.”

Tripling the capital gains tax allowance for those selling to a first-time buyer for a time-limited period would also help bring forward property sales, the report said.

The think tank also said the Help to Buy equity loan scheme should be gradually phased out by 2021 because of the inflationary effect it has had.

It said: “There is increasing evidence to suggest that this demand-side intervention is increasingly being ‘baked’ into house prices.

“Since early 2016 the growth in new build prices has outpaced price growth for existing resold property, strongly suggesting that equity loans have enabled developers to set prices at higher levels than otherwise.

“This effect is by no means limited to London only, with house price data suggesting it has taken place across the country.”

The report also recommended increased but “light-touch” regulation of the private rented sector, including requiring longer tenancies and the registration of landlords, as well as linking in-tenancy rent increases to inflation.

It also suggested reversing cuts to housing benefit targeted at young people in the short term, and relinking housing benefit levels and private rents in the medium term.

Source: FT Adviser

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What’s the relationship between inflation and interest rates?

Inflation reports and interest rate announcements are two of the most important events to watch for any forex trader. But how do the two affect each other, and what does that mean for the currency markets?