Real Estate Economic Impact

Private landlord sales running at twice the market average in London as low yields and higher mortgage rates hit refinancing and some seek to crystallise large capital gains ahead of possible tax changes to #CGT. We track how many homes for sale on Zoopla (part of Houseful) were previously rented. Its been steady at c1 in 10 for the last 2 years. 40% of these homes stay in the rental market with the remainder returning to home ownership. The geographic focus of disposals is concentrated in London which accounts for 2 in 5 landlord sales. London accounts for 1 in 5 private rented homes so landlords are selling at twice the market average. Analysis for the Financial Times this weekend shows disposals are in line with the share of private rented housing across the rest of southern England and below average across the rest of Great Britain. This trend is a combination of 1) the changing economics of buy to let with a mortgage and 2) the scale of uncrystallised capital gains for long term landlords. Higher mortgage rates and bank lending rules mean that a higher rate taxpayer cannot borrow more than 50% of the value of a buy to let property in London. Across the rest of the UK, where gross yields are higher, the impact of higher mortgage rates on refinancing costs is lower and 70% LTV is often still attainable. Still, we estimate 40% of landlords have no mortgage at all and a further 30% have low LTV loans of sub 50%. Stalling house price inflation in London - the average value of a flat is pretty much the same today as it was in 2016 - is also a key factor here and landlords may be taking capital gains now for re-investment. Long term landlords are sitting on some of the biggest capital gains and the prospect of further changes to taxation may see more disposals this autumn. This will keep the rental 'supply side' under pressure in London although more new homes sales to corporate investors is growing supply. We will have to see what actually appears in the autumn #budget but further tweaks to taxation that impact landlords and longer term requirements to improve energy efficiency will continue to influence decisions and support the ongoing rationalisation of the private rented sector. #PRS #BTL #mortgage #housing #renting #BTR #multifamily

The Autumn Budget is out. And for high-net-worth individuals, property owners, and global investors, this is the most consequential fiscal reset in years. Here's what matters beyond the headlines: 1. £26bn in tax rises signals a structural shift, not a one-off correction. Income tax thresholds frozen until 2031 means fiscal drag will pull more people into higher bands year after year. For HNW individuals and business owners, this makes structure more important than salary over the next decade. 2. New property tax on homes over £2m (effective 2028). This will reshape behaviour in prime and super-prime markets: - Valuation strategies and deal structuring - Cross-border mobility decisions for internationally mobile clients - Leverage models, especially for portfolio-backed lending It's a behavioural shift as much as a fiscal one. 3. Salary sacrifice pension efficiency narrows significantly. Contributions over £2,000 now face National Insurance. For executives and HNW professionals, this shifts planning toward corporate structures, investment wrappers, and asset-backed facilities. 4. £22bn in fiscal headroom... but what comes next? Markets will watch whether this is deployed for growth or held for stability. For investors in luxury assets and high-value real estate, medium-term certainty often matters more than any single measure. 5. The macro backdrop: - GDP forecast: 1.5% (2025) - Inflation: still elevated - Rate cuts: possible, but cautious Translation: a slow pivot toward easier conditions, but not a return to ultra-cheap money. The bigger picture: This Budget wasn't designed to shock. It was designed to reset. For the luxury-asset, private-banking, and HNW finance world, the real opportunities lie in the second-order effects: ➡️ How prime property is valued and traded ➡️ How cross-border clients structure UK exposure ➡️ How leverage strategies adapt in a tighter tax environment Strategy doesn't start with the headline measures. It starts with how you respond to them. #Budget2025 #UHNW

𝐁𝐮𝐝𝐠𝐞𝐭 2024: 𝐀 𝐁𝐢𝐭𝐭𝐞𝐫 𝐏𝐢𝐥𝐥 𝐟𝐨𝐫 𝐏𝐫𝐨𝐩𝐞𝐫𝐭𝐲 𝐈𝐧𝐯𝐞𝐬𝐭𝐨𝐫𝐬...🏠 The recent Budget 2024 brought a double-edged sword for property investors. While a reduced Long-Term Capital Gains (LTCG) tax rate of 12.5% seems promising, the devil lies in the details. The elimination of indexation benefits has quietly transformed this tax cut into a huge tax hike for property investors. Indexation, a crucial tool for mitigating the impact of inflation on property investments, has been unceremoniously removed. This means you now pay taxes on the entire property appreciation, regardless of inflation. 𝑳𝒆𝒕'𝒔 𝒄𝒓𝒖𝒏𝒄𝒉 𝒔𝒐𝒎𝒆 𝒏𝒖𝒎𝒃𝒆𝒓𝒔: 🔢 - A property purchased for ₹40 lakh in 2005, now valued at ₹1.5 Crores, would have attracted a tax of approximately ₹5.18 lakh under the old regime. - Post-budget, the tax liability jumps to ₹13.75 lakh, an increase of > ₹8.57 lakh! This unexpected change has profound implications for property investors, retirees, and those planning to sell their homes. It's essential to understand how this affects your financial plans. 𝐖𝐡𝐚𝐭 𝐜𝐚𝐧 𝐲𝐨𝐮 𝐝𝐨? 🤔 1. 𝐂𝐨𝐧𝐬𝐮𝐥𝐭 𝐚 𝐩𝐫𝐨𝐟𝐞𝐬𝐬𝐢𝐨𝐧𝐚𝐥: Seek expert advice to navigate these complexities. 2. 𝐑𝐞-𝐞𝐯𝐚𝐥𝐮𝐚𝐭𝐞 𝐲𝐨𝐮𝐫 𝐢𝐧𝐯𝐞𝐬𝐭𝐦𝐞𝐧𝐭 𝐬𝐭𝐫𝐚𝐭𝐞𝐠𝐲: Consider the implications of this change before making any property investment. 3. 𝐒𝐭𝐚𝐲 𝐢𝐧𝐟𝐨𝐫𝐦𝐞𝐝: Keep an eye on future developments and potential policy changes. Share your thoughts, experiences, and concerns about property as an investment. . . . #Budget2024 #LTCG #RealEstate #TaxImplications #Finance #Investment #PropertyInvestment #TaxPlanning

The Federal Budget’s shift from the 50 per cent property CGT discount to inflation indexation sounds like a tougher tax treatment for investors. But in the market we are heading into, it may not raise as much revenue as expected. Indexation taxes real gains, not nominal gains. That matters when inflation is high and house price growth is weak. If property prices grow slowly, or fall, while inflation remains elevated, the taxable gain can shrink significantly. In some scenarios, the new system could raise less tax than the old 50 per cent discount. This is the counterintuitive part of the CGT change. It only works as a strong revenue measure when property prices rise materially faster than inflation. In a softer housing market, that is far from guaranteed.

The government's revised budget announcement allows taxpayers to pick between a 12.5% Long-Term Capital Gains (LTCG) tax rate without indexation and a 20% rate with indexation, for properties purchased before July 23, 2024. This will have a very profound impact on both homeowners and aspiring homebuyers. #Homeowners: This change gives homeowners flexibility in their tax liabilities when they sell their property. For properties held over a long period, where inflation has majorly raised the property's value, opting for the 20% tax rate with indexation would be beneficial. Indexation adjusts the purchase price for inflation, potentially reducing the taxable gain and overall tax liability. For properties held for shorter periods or in low-inflation periods, the 12.5% rate sans indexation could be more beneficial and result in a lower tax burden. #Homebuyers: This revision can potentially stimulate the residential property market because it provides clarity and implies potential tax burden reduction. Homebuyers' sentiment will improve as they have flexible options for addressing their future #capitalgainstax burden. This will result in higher demand, particularly in markets where #property values have been seen to rise significantly. As per ANAROCK Research, H1 2024 saw total sales of nearly 2.51 lakh units across the top 7 cities, 9% more than the same period last year (H1 2023). Given that Q2 2024 saw sales tapering due to the election heat and the increased prices across cities, the new tax imposed by the government in the budget was considered a dealbreaker for many. Now, with the government giving these options to homebuyers, #housing #sales momentum will continue unimpeded.

As someone who sells commercial real estate across the country, I can tell you that every market comes with its challenges. However, Cook County, Illinois, which includes Chicago, stands out as one of the most difficult markets to navigate. On paper, Chicago, the third-largest city in America, has everything an investor could want: a diverse economy, thriving industries, and a major metropolitan population. It should be a prime market for commercial real estate deals, a place where investments practically sell themselves. But one major hurdle keeps stopping deals in their tracks: property taxes. Cook County’s property tax system is notorious for being both unpredictable and excessively high. Unlike in many other markets, property taxes here are uncapped, meaning they can spike without warning. This volatility wreaks havoc on the financial models investors use to evaluate deals, making it nearly impossible to forecast returns with confidence. For example, I recently worked on a deal for a strip center in a Cook County suburb. The property taxes were already steep, but a closer look revealed they had increased by nearly 30% over the past three years, with no sign of stabilizing. That kind of uncertainty makes underwriting deals a nightmare, no matter how strong the tenant mix or ideal the location. I have lost count of how many deals have been redlined solely because of this issue. Chicago has so much untapped potential, but until the property tax problem is addressed, Cook County will remain one of the toughest markets in the country for commercial real estate. Investors crave certainty, and unfortunately, this market offers anything but that.

My latest Financial Post article discusses the new mortgage insurance proposals announced by the CDN federal gov’t that encourages existing homeowners to convert part of their property to rental units. This proposal contains tax traps: “…I will stay in my tax lane and not address the obvious insanity of enticing an already indebted population to take on even more debt, with the carrot being the “incredible advantages” of becoming a landlord. But I will point out the complete disregard for the myriad complicated tax issues that come with such a housing conversion. The first tax consideration that must be considered is the “change in use” rules of the Income Tax Act... If so, the proportionate share of the property’s fair market value (usually computed by reference to area) that becomes a rental property is deemed disposed of at fair market value... Such a deemed disposition will usually result in a gain that can often — but not always, depending on the facts — be offset by the individual’s available principal residence exemption… The second consideration is that from the conversion date forward, the taxpayer will be obligated to report any rental income... The third consideration is that a future principal residence exemption claim on the eventual disposition of the property would only be available on the personal-use portion of the property, not the rental portion. Be mindful of that. The fourth consideration is the possible GST/HST consequences. As noted by renowned commodity tax expert Noah Sarna, there could be significant GST/HST liabilities for people who construct a laneway home and rent it to a long-term tenant. The same outcome generally doesn’t flow from a basement suite. The CRA discusses these issues in GST/HST Info Sheet GI-168. Confused? You’re not alone. These areas of income and commodity tax confuse even the most seasoned experts, who must carefully look at the resulting consequences of such conversions…It is not simple… It is irresponsible for governments to release proposals with a lot of fanfare (to create the perception that they are solving a housing crisis) without any mention of the tax and other complications that will undoubtedly be created... The push to turn homeowners into landlords simply adds to the mountain of government interventions in our housing markets… Given that, is more government intervention the answer? Absolutely not. “Contrary to the vision of the left, it was the free market which produced affordable housing — before government intervention made housing unaffordable,” renowned economist Thomas Sowell has said. Some government intervention is inevitable, but it needs to be thoughtful. In the present case, I hope and trust that the people who go into debt to take advantage of this latest program will be well advised on both the financial and taxation consequences. It’s not pretty. This latest program is certainly not a game-changer.”

Second-home taxes are becoming one of the newest pressure points in the housing affordability debate, and property owners should be paying attention. New York’s proposed pied-à-terre tax is part of a broader trend already appearing in places such as California, Hawaii, Montana, Rhode Island, South Carolina, Vermont, and Washington, D.C. The idea is politically appealing because second homes are visible symbols of wealth, especially in communities where local residents are struggling with rising prices and limited inventory. The bigger question is whether these taxes actually solve the problem they are designed to address. A higher tax bill on a vacation home may generate revenue, but it does not automatically create more housing, reform zoning rules, speed up permitting, or reduce construction costs. Housing affordability is ultimately a supply issue, and tax policy can only go so far if communities are not also making it easier to build. There is also an economic reality that policymakers cannot ignore. Second-home owners often have flexibility. They can sell, relocate, change ownership structures, or move capital to friendlier jurisdictions. That means projected revenue may look stronger on paper than it proves to be in practice. For owners and investors, the takeaway is clear. A second home is increasingly becoming a policy target. Anyone buying, holding, or advising on vacation property should be factoring special taxes, local political pressure, and changing affordability policies into the analysis. The second-home tax may be spreading because it is easy to explain. Whether it meaningfully improves housing affordability is the question that deserves closer scrutiny. #RealEstate #TaxPolicy #HousingAffordability #SecondHomes #VacationHomes #PropertyTax #RealEstateInvesting #PublicPolicy #HousingMarket

🗺️ Property Taxes: The Silent Force Shaping Real Estate Returns When investors compare markets, we obsess over cap rates, rent growth, job pipelines, and supply pipelines, but effective property tax rates quietly play an equally powerful role in shaping long-term returns. A new NAHB analysis puts this into perspective by adjusting for home values, offering a truer comparison of tax burdens across states. 📊 Nationally, the effective rate is $8.88 per $1,000 of home value. Translated: That’s 0.888% of home value paid annually in property taxes. But the state-by-state variation is where things get interesting: 🔥Highest Effective Rate: Illinois: $17.93 per $1,000 Nearly 2% of home value paid every year in taxes. 🌺 Lowest Effective Rate: Hawaii: $3.08 per $1,000 Despite having the highest average home value in the country ($1.05M). 🌍 Regional Patterns: The Northeast continues to show some of the highest effective tax burdens. Many Sun Belt and Mountain West markets sit below the national average, improving long-term yield stability. State policy choices, not just home values, drive these differences. For investors building national portfolios or entering new markets, these tax dynamics can meaningfully change underwriting: ✔️ A high-tax state compresses cash flow and slows equity build. ✔️ A low-tax state enhances both yield and long-term appreciation compounding. ✔️ And in fast-growth markets, tax policy often determines whether affordability stabilizes or erodes even faster. In a market where every basis point matters, ignoring effective property tax rates is ignoring part of your return. Source: NAHB Analysis, ACS 2024 1-Year Estimates #RealEstateInvesting #PropertyTaxes #Multifamily #HousingMarket #AssetManagement #MarketResearch #PropTech #CRE #RealEstateData

New Paper! Low property taxes concentrate ownership among the elderly, while higher property taxes enable more young families to own homes. With Josh Coven, Abdoulaye Ndiaye, and Sebastian Golder. Background: the bulk of the housing stock is owned by 50-70 year old empty nesters aging in place with spare bedrooms, while young families with children face crowded housing despite a higher need for space. See also Redfin research: https://lnkd.in/eYR5n8fu The key insight from the paper: Property taxes act like a "forced mortgage" — upfront price is lower, capitalizing the taxes, alongside higher ongoing payments. Just like a mortgage would do. This tradeoff helps financially constrained young families overcome down payment barriers. Consistent with this logic — areas with higher property taxes have more young homeowners, fewer empty bedrooms, and more children as % of population. House prices and price-to-rent ratios are lower. We compare TX (high property tax) vs CA (low tax due to Prop 13) housing markets. Home ownership rates among the young are extremely low in California — how much of that is driven by low taxes and high prices? We build a structural lifecycle model which matches a key aspect of the data—homeownership gradients in CA are very steep, ie young people don't own while old people do. By contrast, in TX, in both data and model we see more young homeownership—but less elderly homeownership. Raising CA taxes to TX levels would increase overall homeownership by 4.6% and young household ownership by 7.4%. Higher property taxes in CA lead to 18% lower house prices. This enables more young, financially constrained families to buy homes despite higher ongoing tax costs. Our results highlight how asset taxes like property taxes can significantly impact prices and allocations, especially with financial constraints. Higher taxes can actually make homeownership more accessible to young families, while low taxes can lock such families out. Paper: https://lnkd.in/eM796tcx Substack: https://lnkd.in/edwCqNGz