First Time Buyers urge Government to "stand firm for fairness" on Capital Gains Tax increases for Buy-to-Let and Second Home Owners
Priced Out, the national affordable housing campaign group representing first time buyers, today urged the Government not to back down on including Buy-to-Let investors and second home owners in the planned increase in Capital Gains Tax.
Katy John, Spokesperson for PricedOut, said:
"The new Government should stand firm for fairness in the tax system. Discouraging speculation in the property market and spreading the tax burden more evenly between wages and other forms of income would help a generation of priced out first time buyers.
"We have an urgent budget deficit and a pressing need to rebalance the economy towards productive enterprise. Any u-turn to preserve tax breaks for Buy-to-Let investors or second home owners would be a betrayal of First Time Buyers and the wrong choice for future economic health.
"The tax system gives clear signals as to what type of economy and society we want to become. Any backtracking on CGT by George Osbourne would be a red flag against enterprise and equity and a green flag for rent seeking and speculation. Over the last ten years, we have seen at least 1.2 million first time buyers displaced from the property market by Buy-to-Let investors – now is the time to redress the balance. We think it is important that the views of first time buyers are heard in this debate in opposition to those who stand against the CGT increase. We are not surprised at the strong reactions from those with vested interests – such as the National Landlord’s Association – who are worried about their own property empires rather than the pressing national issue of housing affordability."
Recent research by PricedOut found that unequal purchasing power due to the UK tax system and lax financial regulation has given buy-to-let investors an unfair advantage over first time buyers, and lies behind the growing displacement of first time buyers from the housing market. Council for Mortgage Lenders data analysed by PricedOut shows that, for an average first time buyer property, buy-to-let investors' mortgage costs – given their tax advantages and common use of interest only mortgages – amount to just over a seventh of their net income. In comparison, first time buyer average mortgage costs amount to a nearly a third of net income.
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For media enquires, please contact PricedOut Press Officer, Katy John at Katy@pricedout.org.uk or on 07545 147771
www.pricedout.org.uk
Notes to the Editor
The number of Buy-to-Let mortgages in the UK has increased tenfold from just 3.5% of house purchase mortgages in 1999 to 28.9% in 2006 [1]. This represents over 1 million new Buy-to-Let mortgages. Additionally, it is estimated that only 54% [2] of Buy-to-Let landlords use Buy-to-Let mortgage finance to purchase their properties, meaning that, in reality, the number of UK Buy-to-Let properties is significantly higher. Conservative estimates calculate that this additional demand has added at least an extra 7.4% to UK house prices, equivalent to £13,485 on the average British Home. [3] This dwarfs the average amount spent by FTBs on stamp duty - £1,750 according to Halifax. [4]
High house prices, driven in part by the rise in Buy-to-Let, have displaced an estimated 1.2 million 'new' households away from Owner Occupation [5] and have led to around 1.4m fewer First-Time Buyer mortgages since 1999. [6] A recent report by the Council for Mortgage Lenders (CML) found that levels of Owner Occupation are at their lowest since the 1980s. [7] High housing costs also contribute a damaging drag on UK economic performance. They increase personal debt levels, concentrate individual wealth portfolios disproportionately in one asset class and increase vulnerability to external credit shocks. High house prices reduce labour mobility, add an additional cost to UK businesses in higher wages and drain disposable income out of the wider economy. The misallocation of resources impacts on the total level of investment capital available for businesses and wider consumption levels.
Source: CML BTL mortgage lending data, Halifax First Time Buyer Review 2007
Unequal purchasing power due to the UK tax system and lax financial regulation has given Buy-to-Let investors an unfair advantage over First Time Buyers and lies behind the growing displacement of First time Buyers with property investors. Council for Mortgage Lenders data analysed by PricedOut shows that, for an average First Time Buyer property, BTL investors’ mortgage costs – given their tax advantages and use of interest only mortgages – amount to just over a seventh of their net income, whereas FTB average mortgage costs amount to a nearly a third of net income. PricedOut are calling on the government to change the tax system to stop this unfair advantage and allow First Time Buyers a chance to get on the housing ladder.
[1] Council for Mortgage Lenders data
[2] See Ball, M. (2006) Buy-to-Let: The Revolution Ten Years On – Assessment and Prospects, Association of Residential Letting Agents (ARLA)
[3] See ‘Buy to Let mortgage lending and the impact on UK house prices: a technical report', Ricky Taylor, National Housing and Planning Advice Unit, Department of Communities & Local Government.
[4] Halifax First Time Buyer Review, December 2007
[5] 'Affordability – more than just a housing problem', NHPAU, May 2009
[6] http://www.telegraph.co.uk/finance/newsbysector/constructionandproperty/2821472/First-time-buyers-set-to-rescue-house-prices.html
[7] Council of Mortgage Lenders, http://news.bbc.co.uk/1/hi/business/8547902.stm