Monthly Archives

November 2019

sam-howard

Housing and the Climate Crisis

By Development Finance, Opinion

Walking past the Extinction Rebellion protest in Bishopsgate, a few weeks back, whether you agree with their tactics or not, brought the reality into focus, that our planet is in serious trouble. The onus is on every single one of us to do more and it will require a concerted effort.

Given that Magnet Capital’s focus is to support our SME Developer clients in building the right new build houses in the right places, it is pertinent to shine the spotlight on what new homes can do to help the country meet its target of reducing greenhouse emissions to net zero by 2050. The new and existing housing stock currently accounts for circa 20% of emissions.

Somewhat under the radar, the Government in its 2019 Spring Statement has turned its attention to residential housing emissions by including a commitment that, by 2025, they would introduce a Future Homes Standard for new build homes. This would include low carbon heating and world-leading levels of energy efficiency. The Government has now published a new consultation, setting out these plans, which is open to responses until 10 January 2020. This consultation marks the first step towards implementation of the 2025 Future Homes Standard, proposing to tighten the standards on energy efficiency and ventilation in new homes as of late 2020.

It includes two options:- the first is a 20% improvement on carbon dioxide emissions by ensuring new build houses have triple glazing and a waste water heat recovery system.

The second would result in a 31% improvement which require only double glazing but crucially low-carbon heating and/or renewables such as photovoltaic (solar) panels.

The government’s aim is for the housing industry to develop the necessary supply chains, skills and construction practices to deliver low-carbon heat, and highly energy efficient new homes by 2025. Crucially, it has been rumoured to include the banning the installation of fossil fuelled heating systems in homes built from 2025. Whether this means gas boilers will be banned for new builds is a matter for debate, given there are genuine concerns over whether alternatives such as air source heat pumps are viable because of their high initial cost and current ability to heat a home.

However, what is not in doubt is that new build house builders cannot bury their head in the sand, as the first raft of changes of increased efficiency standards will apply by the end of next year. These will have cost implications for house builders and SME developers need to be aware.

Changes are coming and some will be painful but ultimately we all have to up our game to protect our planet.

 

stamp-duty

How Does Stamp Duty Work for Multiple Properties?

By Blog, Development Finance

If you are buying one or more properties, it is important that you fully understand how stamp duty liability works, as it does not work in an identical way to buying just one house. But how do you understand the differences between the two? We take a closer look at the things you must be aware of before purchasing multiple buildings. 

What are linked transactions?

Knowing what is meant by a linked transaction is important when it comes to stamp duty liabilities, as this will determine how much you will end up having to pay.  In summary, a linked transaction is when a single party buys at least two properties from the same seller. This includes a piece of land, flats, or a house.

A transaction is also considered to be linked if the person connected to the buyer (for example, a business partner or relative) decides to buy a property from the same seller.

What’s more, if the purchase is part of a scheme or a single arrangement (or part of a number of transactions) then this is also considered to be a linked transaction.

How much stamp duty tax do I need to pay?

In terms of the exact amount you will need to pay if you are buying two or more properties (and these are considered by the HMRC to be linked transactions)  this will be calculated based on the total value of all these linked transactions. This is opposed to calculating the tax owed based on each property’s individual value.

For example: if you decided to purchase two properties, both worth £125,000, then the HMRC would require you to pay stamp duty on its total value of £250,000.

It is important to remember that you will not be required to pay stamp duty on the first £125,000 of a transaction’s value. However, you will need to pay stamp duty at a value of 2% over this initial amount.

That means that with regards to the example given above, you would be required to pay stamp duty that is worth approximately £1250 in total.

You should also keep in mind that Stamp Duty Land Tax has increased since 1 April 2016. This on top of current rates of purchases for additional properties that are residential. This includes second homes as well as buy-to-let properties.

Are there stamp duty exemptions for additional properties?

Yes, not every single property will be required to pay stamp duty. For example, this is no requirement for single properties or properties that are considered to be linked transactions with an overall value that is below £125,000.

plot-of-land

Is It Possible To Buy Land Without Money?

By Blog, Development Finance

In the majority of cases, if you are looking to invest in land or property, you will usually need in order to be able to finance such an investment, but it is possible to purchase with little to no money.

How do you achieve this? Prior to the financial crash in 2006, it was commonplace for mortgage lenders to happily provide 100% mortgages to buyers. These days, finding this kind of mortgage is extremely rare. We take a look at the different alternatives that are available to you, should you be interested in buying land but have little cash upfront to buy it with.

Borrowing against your own property

It could be the case that you do not have much in terms of cash, but do have a considerable amount of equity that is locked in your current property. If this sounds like you, it could provide a way in which you can purchase land, if you decide to extend the mortgage in order to release the equity locked up in it. That would enable you to then use these funds to invest elsewhere.

If you were interested in pursuing this option, there are some questions that you should carefully consider before making any final decisions. For example:

  • Not all mortgage providers will necessarily allow you to borrow additional money against your house so you can invest in property: this is something you will need to verify with your mortgage lender or broker.
  • The residential mortgage will be assessed on your income, so you will need to make sure you have enough earnings to be able to release equity.

Look at a joint-venture property development

Have you considered looking further into joint-venture property developments if you want to purchase land but have a small amount of money? It is worth taking a further look at.

But how does a joint-venture work in practice? The process is relatively straightforward in nature: you find a development project, research it and then look for another person to join the project who is willing to provide the deposit for it, and may also need to provide other forms of security.

This joint venture can work out profitable, as both parties ultimately share profits upon completion.

Providing additional security

Another potential option for you to be able to buy land with little money is to provide additional security to a lender. This is usually in the form of a high-value possession, in most cases this will be in the form of a property but could be a car or another costly item. Lenders in the property sector will offer 100% borrowing to purchase land if the collateral is given, is this presents less risk to the lender.