VAT hike will hit property sellers
During his emergency budget Chancellor of the Exchequer, George Osborne, announced that the rate of VAT will rise from 17.5% to 20% on the 4th January 2011.
Felicity J Lord branch manager Adam Wolfryd said people thinking about moving in the next year should consider putting their property on the market now to avoid having to pay more in estate agency fees, conveyancing costs, surveys and land registry and search fees next year.
He said: “Sellers and buyers should also bear in mind that from January next year the rise in VAT will mean that moving costs are likely to increase, so everything from hiring a removal van to redecorating or furnishing a new property will be more expensive.”
He added that the property market is “extremely buoyant” at the moment and that the firm was seeing a “very quick” turnaround on properties on their books.
But Nigel Lewis, property analyst at FindaProperty.com, said: “In the grand scheme of things another two and a half percentage points on top of the cost of moving isn’t going to motivate people into selling early.
“With house prices fluctuating at the moment sellers are more likely to wait to see what happens with prices rather than pre-empting the VAT rise. First-time buyers may be a different story, though. Without the worry of selling a house we may see more first-timers entering the market to beat the rise and save money which could go towards a deposit. But it’s still unlikely we’ll see a rush on the market.”
Dominic Toller, managing director at property website propertyearth.net, also said a rush of people putting their homes on the market ahead of the VAT rise was highly unlikely.
He said: “Moving house is a much more complex decision than just cost and I don’t see that an increase this incremental will substantially affect the timing of this decision for most people.”
Trevor Kent, the former president of the National Association of Estate Agents, said he didn’t believe the VAT rise would encourage a significant number of people to market their homes sooner than they were planning to avoid higher costs.
He said: “You’re talking about a 2.5% rise in the fee which mustn’t become confused with 2.5% of the value of the property. People might think about the uplift in cost, but I don’t think it will be the prime reason a vendor would put their property on the market sooner than they’d planned.”
And David Brown, commercial director of LSL Property Services, added: “Buyers will feel a slight increase on associated moving expenses such as removal costs and lawyer fees, yet the rise won’t be big enough to make buyers reconsider purchase decisions.
“The brunt of the increase will be shouldered by landlords and buyers looking to renovate and refurbish a property on purchase. A renovation that would have cost £20,000 under the current VAT rate will now cost a landlord an additional £500 – three quarters of a month’s rent. While we don’t anticipate a strong surge in the number of investors rushing purchases through before its introduction, it is an additional – and unwelcome – cost for landlords to bear.”