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Property wins on recognition but loses on fund tax

Two notable features in this years thin budget from a property and mortgage perspective. First the focus on this area in the Chancellor&#39s speech was a long overdue recognition of its importance to the wealth and personal disposable income of private individuals. Second was the dawning that stability in mortgage payments from proper fixed rates is an important ingredient in ensuring the long term stability of consumer demand and thus the economy itself. So the review by Professor David Miles into the poor take up of such products is to be welcomed. However he has not, in contrast to other areas, been asked to identify options for Government action. Our mortgage market has become one of the world&#39s most sophisticated yet we are unable to provide long term fixed finance with the flexibility so endorsed by the Chancellor simply because the Sterling Bond market will not accept early repayment risk. The Government could at minimal cost commence a private securitisation vehicle to help solve the problem, much in the way that Fannie-Mae was created to provide mortgages for the unmortgagable in the US by providing Government Guarantees. So don&#39t expect the market for Fixed rates to change fast overnight. Speeding up the planning regime, the largest single block to new build supply, according to most house builders, is welcome as is the removal of the double exposure to CGT currently suffered under Islamic mortgages. Both moves will improve access and volumes in the mortgage market.

Although the much heralded increase in Stamp Duty rates on residential property did not happen the sustained failure to index the thresholds continues to improve the marginal tax take as inflation does the tax collectors job.

Property investment as a class is a winner and loser. Brown&#39s obsession with the Stamp Duty anti avoidance measures on commercial property is now coming into effect. The full impact of this transactional tax on property funds could be to lower returns by up to 1% on actively managed funds. At a time when many investors and individuals are attracted to this class why should it be so disadvantaged compared to equities. A small glimmer of hope for smaller unit funds lies in the raising of the threshold for Stamp Duty on commercial to £150,000.

Finally for the investor in the social housing element of buy to let the simplification of Housing Benefit should both improve demand and simplify rental collection in this sector.

All in all not a budget for property and mortgages but at least one which recognises their importance.


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The FSA&#39s decision to give lower pay rises to members of its final-salary scheme could start a trend that will hit confidence in such schemes, warns Scottish Life head of pension strategy Steve Bee.The regulator is increasing wages to members of the scheme by 4.2 per cent compared with 6.7 per cent increases for members […]

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Money Marketing is offering IFAs a unique opportunity to grill the industry&#39s regulators and take part in a lively debate over the future of financial services regulation. With 18 consultations affecting IFAs and a myriad of regulation changes facing the industry, this is your chance to get the lowdown from the decision-makers and key protagonists […]

Investec plants foot in hedge FOF market

Investec Asset Management has established the absolute return fund series II, a fund of hedge funds that invests in a range of hedge funds that use different strategies. Investec has been trying to get into the hedge fund of funds market since 2001, but did not have the experience to do this. The solution was […]

Scottish Life – Individual Section 32 Pension Plan

Wednesday, 7 May 2003 Type: Individual section 32 pension plan Minimum premium: Lump sum £2,500 Minimum-maximum ages: 16-75 Fund links: UK equity, UK ethical, global managed, European, managed, with profits, property, fixed interest, index linked, defensive managed, corporate bond, security 98, security 100, deposit, Japan, Far East, global equity, Pacific, worldwide, UK mid cap, American, […]

Reforming India: just the beginning

By Kunal Desai, Neptune India Fund

As global investors continue to scour emerging markets through the lens of reform potential, India shines bright. Indeed, we think it can sparkle even brighter. We anticipate India’s self-imposed 10-year ‘policy holiday’ to turn into one of the most pro-growth and pro-investment policy calendars seen in Asia in years. The Indian electorate has engineered a historic verdict. We now have the strongest Indian government since 1984, with the pro-market Bharatiya Janata Party (BJP) achieving an absolute majority for the first time in the party’s history.


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