a nail in the coffin for first time buyers?:
On the 17th June the States of Jersey decided to introduce a new tax on share transfer transactions which will be called a Land Transaction Tax. We asked Mr Peter Seymour of the Mortgage Shop Plus what this means to first time buyers: ?It seems a great shame that a sector (share transfer) which is dominated by first time buyers has to take the brunt of this new tax when the potentially far more lucrative taxation of commercial transactions has, for the time being, been set aside. As this is new legislation, it has to be approved by the Privy Council, a course of action which the States feel will take up to six months so it is unlikely that LTT will be introduced before January 2009.
However, the first time buyer discounts currently available on stamp duty on freehold transactions will also become available on share transfer. The new law will be administered by the Income Tax Department and transactions will not be permitted to proceed until a purchaser is in possession of a receipt showing that the tax on the transaction has been pre-paid. Some might say that this is yet another nail in the coffin of the first time buyer market although flats and houses are still being marketed to them vigorously albeit in a limited number in respect of houses.
For the future first time buyers? aspirations to purchase a house have all but disappeared and now they must acknowledge that a flat will instead be their first home for the foreseeable future. The first time buyer market has surged way beyond the means of many, seeing increases of between 20% and 25% last year alone whilst the flat market increased far more modestly by no more than a maximum of 10% over the same period. Perhaps, as demand moves onto flats so one will then see increases in value occurring in this sector as well, although it is unlikely that these increases will be anywhere as dramatic as have been witnessed in the past.
The good news for first time buyers is that Newcastle Mortgage Loans continue to offer 100% mortgages, not just to first time buyers but to allcomers although they will have to be supported by a guarantor. The two options available are fixed for 3 years at 6.80% and for 5 years at 6.70% and offered for loan terms of up to 40 years. This sounds like an extended prison sentence although the thinking behind these products is that initially the mortgage would run interest only until professional qualifications and work experience resulted in higher salaries being generated at which stage capital repayments would kick in. Several years further down the line, as income increased further, so monthly repayments of capital could increase further at which stage the mortgage term would start to reduce with the option of taking it down to 30 or 25 years if one wished. The flexibility of this mortgage is also enhanced by the fact that it is not restricted to 100% mortgages and a number of facilities at much lower loan to values have been arranged so long as they are supported by a guarantor.?
*Please note all figures correct as of 17/07/08.
