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Budget 2014 Response

UK Chancellor George Osborne has set out six issues of relevance to existing and future property investors
in London in his Budget delivered this afternoon.

1. No bubble risk: Osborne says that at the current rate of price growth it will be 2018 before average UK house prices reach their pre-downturn peak, suggesting he believes there is little risk of a current or future bubble. In any case the Bank of England’s Monetary Policy Committee will be “vigilant” in its monitoring of future price rises.

2. Stamp Duty: The existing 15 per cent stamp duty currently applied to homes costing over £2m and purchased through off-shore companies or corporate ‘envelopes’ will from midnight tonight apply to a wider group of properties – all those priced above £500,000. Osborne says this is part of a wider government attack on tax avoidance.

3. Right To Build: £150m of funding for the existing Community Right To Build initiative, which encourages
small community-led construction projects, including homes.

4. House-building: A pledge to create an additional 200,000 new homes across the UK by 2020 (how this is to be achieved, or whether this is in addition to existing building levels, has not been specified.) This is widely considered to be far below the number of new homes requires to meet the growth in households in
London and elsewhere.

5. Help To Buy: Osborne has confirmed that Help To Buy Equity Loan (the first part of the HTB scheme – the
part applying to purchasing new homes) will be extended until 2020.

6. New Garden City: The Chancellor has also confirmed the creation of 15,000 new homes at a new Garden
City at Ebbsfleet in Kent, as well as smaller infrastructure improvements elsewhere.

These measures have been set out against a context of what the Chancellor describes as an improving
economy, which will create 1.5 million new jobs within five years and which will see a budget surplus – not
deficit – by the end of 2018-19 financial year.

Comment from Vidhur Mehra, Finance Director, Benham & Reeves Residential Lettings

“Continued economic growth in the UK, as announced by George Osborne, will see the economy grow by
2.7%, up 1.8% a year ago. This will create 1.5 million new jobs across the country over the next year, fuelling tenant demand. However, we do not feel that the 200,000 new homes to be created by 2020 goes far enough as previous government estimates have said that this many new homes need to be created annually to meet demand. It is a start, but is not nearly enough. We therefore, expect further growth in the private rental sector although the entry point for many investors will grow ever higher.

“We are relieved to hear that the 15% stamp duty rate on properties above £500,000 purchased through
corporate envelopes continue to not affect landlords. When this punitive rate of tax was first announced on
properties valued at over £2 million, this important fact was not made clear, causing much concern within the industry until the treasury later qualified the issue.

“The chancellor also re-confirmed that capital gains tax would be introduced for non-residents for future
gains on the sale of UK residential property from April 2015. This was widely anticipated and simply brings foreign investors in line with British ones. It is not punitive but simply fair.”

-ENDS-

Contact details:
Vidhur Mehra, Finance Director, Benham & Reeves, Tel: 020 7319 9730
Email: info@benhams.com, Web: www.benhams.com

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About the Author

Established in 1958, Benham and Reeves is one of London’s oldest, independently owned property lettings and sales agents.  With specialism in residential sales, corporate lettings and property management in prime areas of London, the company operates from 19 prominently located branches and 8 international offices.

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