FTB - 2 bedroom house on SDLT threshold at £250,000.Will it ever make more in future?

Chelsea123

I am a FTB and have been looking for a 3 br property but have found a 2 br property that I really like. The sellers are reluctant to take any less than asking price (so says the EA).

As it is on the SDLT threshold and I will be planning on moving in 5-10 years I am under the assumption that I will only make back what it has sold for (assuming also that the market has stayed stable during this time) and not be able to sell for more - is this a massive problem as it is still a roof over our heads/somewhere to start a family? I guess any house has the potential to lose value in that time frame too!

Sorry, I'm so indecisive. It is also a sealed bid which I hate!

holly_hobby

Not sure the relevant of ref to FTB and on the SDLT threshold ... but if you mean on the brink of tipping over the nil rate band threshold, some news for you ....

The SDLT FTB incentive of nil rate band upto £250k, ended nearly 12 mths ago on 24 March 2012.

The current nil rate band threshold for all purchasers is capped as 125K, with anything above this and upto 250k, incurring a 1% SDLT fee (on the total pch price), the rate subsequently increases to 3% for 250k-500k and so on.

Meaning that if your pch price is £250k, you will have a SDLT bill of £2,500 at completion (ie £250k x 1%), £250,001+ and its 3% of the total.

You have to remember the EA is acting on behalf of the Vendor - so take with a pinch of salt.

I wouldn't buy a house in todays climate hoping to make money on it, those days are gone for a while I feel, but if you like it, you can afford it, it will make a good family home for you - then make your best offer and what will be ... will be ...

Good luck

Hope this helps

Holly

Dukesy

Firstly, all EA's say that. They're trying to get the highest price they can, not only for their clients but for them as well - remember that they take a percentage of the sale price.

Never bet on making money on a house unless you can and will be making improvements to it. The market might do anything over the next few years, and unless there's room to improve the house, it is highly possible that you may actually lose money. Our old neighbours bought before the crash for far too much, put on an extension and in 2011, the house having been on the market for 2 years, just scraped what they'd spent back.

Also, if you were considering carrying out any improvements, make sure you check what other houses in the area sell for top whack. There may be a very definite ceiling price.

Chelsea123

Dukesy wrote: »

Firstly, all EA's say that. They're trying to get the highest price they can, not only for their clients but for them as well - remember that they take a percentage of the sale price.

Never bet on making money on a house unless you can and will be making improvements to it. The market might do anything over the next few years, and unless there's room to improve the house, it is highly possible that you may actually lose money. Our old neighbours bought before the crash for far too much, put on an extension and in 2011, the house having been on the market for 2 years, just scraped what they'd spent back.

Also, if you were considering carrying out any improvements, make sure you check what other houses in the area sell for top whack. There may be a very definite ceiling price.

Thanks, for the area this really is top whack and there won't be any real room for improvements, possibly an extension out the back but not enough loft space to make a third bedroom.


The thing is, if I buy for £250,000 now and luckily make the same back in 5-10 years time (as I don't see anyone paying over this amount and hitting the 3% stamp duty) is this a bad thing? How would I be able to move up the ladder and get a larger property as I won't have made anything on the house?

Chelsea123

Thanks Holly, I'm aware of the 1% stamp duty but I'm also aware that in future no-one will want to buy the house for anything more than this as it will mean paying the 3% stamp duty - meaning that it will stay at this value for the foreseeable future.

holly_hobby

Adding saved capital to any free equity realised on sale (which if you have on repayment for 10 yrs, there will have be some reduction to the os capital amount - not huge but some).

Other than that you will have to pch at a similar price range.

Why not wait for a 3 bed property to become available in your price range - as 2 beds generally can be slower to sell on.

Holly

holly_hobby

Chelsea123 wrote: »

Thanks Holly, I'm aware of the 1% stamp duty but I'm also aware that in future no-one will want to buy the house for anything more than this as it will mean paying the 3% stamp duty - meaning that it will stay at this value for the foreseeable future.

Agreed, so sort of answered your own question really ......

H

giraffe69

It's fairly unlikely that in 10 years time the thresholds will still be the same.

zzzLazyDaisy

Chelsea123 wrote: »

How would I be able to move up the ladder and get a larger property as I won't have made anything on the house?

The most important thing is to buy a house that meets your requirements now, and for the foreseeable future. By the time you come to sell things might have changed....

The stamp duty threshold might have been increased
House prices might have remained stable so the differential between your house and the next one you buy may not have increased
Your wages may have increased so you may be able to afford a higher mortgage
You may have planned for a future move and overpaid on your mortgage, thus reducing the interest/capital ratio and giving you more equity in your current home to put towards your next home
You may decide you love the house and never want to move

But as others have said, take what the EA says with a pinch of salt, and keep looking around. Also if the house is priced at the top end for the area, you may find that your lender's surveyor values it lower, and then you may have no option but to try to renegotiate the price.

holly_hobby

giraffe69 wrote: »

It's fairly unlikely that in 10 years time the thresholds will still be the same.

Yes that's entirely possible and very probable.

Problem is if the rating bands don't rise, OR don't rise sufficiently to ensure that even with a small to medium profit, the OPs pch will still be exposed to 3%. (unless of course they would be just happy to receve what they paid for it).

Unfortunatley its all ifs and buts at the minute.....

Hope this helps

Holly

Dukesy

Chelsea123 wrote: »

Thanks, for the area this really is top whack and there won't be any real room for improvements, possibly an extension out the back but not enough loft space to make a third bedroom.


The thing is, if I buy for £250,000 now and luckily make the same back in 5-10 years time (as I don't see anyone paying over this amount and hitting the 3% stamp duty) is this a bad thing? How would I be able to move up the ladder and get a larger property as I won't have made anything on the house?

Here's the real crux of the matter. Unfortunately, if you buy at the top of the market, you are in a very precarious position when it comes to any potential to make money on a property. You will have to rely solely upon being able to save more for a deposit on the next place and on your earnings increasing to allow for a bigger mortgage - and this might not even work out, as if your house depreciates, you will lose money that you could have put towards a deposit on the next house up the ladder. Unfortunately this is where so many people have come unstuck, and unless it's your 'forever home' you really need to be so careful and make sure your heart is not ruling your head.

In general, even if you're not up for major building works, I would always say that if you're aiming to use your purchase as a stepping stone to help you onto the next rung of the ladder, you should focus on finding a house that's in need of a bit of love and is priced well below the top asking price for similar properties in the area - there's never a guarantee, but this will give you more of a cushion and would be a safer bet.