CGT on property bought under market value

stacey4857

We purchased our property from our landlord in March 2014 for £125k, the valuation was £160k. We are planning on selling the property next year (2016) as we are expecting our third child (2 bed flat) and we would like to know if we will be subject to CGT when we sell? The current market value is roughly £250k, the house prices have sky rocketed since last year and we have completely renovated as we planned to stay for the long term. We have lived in the property for 8 years, 2 as the home owner and it's been our only home.

CLAPTON

stacey4857 wrote: »

We purchased our property from our landlord in March 2014 for £125k, the valuation was £160k. We are planning on selling the property next year (2016) as we are expecting our third child (2 bed flat) and we would like to know if we will be subject to CGT when we sell? The current market value is roughly £250k, the house prices have sky rocketed since last year and we have completely renovated as we planned to stay for the long term. We have lived in the property for 8 years, 2 as the home owner and it's been our only home.

if it has been your primary (or only ) home since you bought it, then there is no cgt as primary homes are exempt

stacey4857

Yep it's our only home. Thanks.

Mojisola

stacey4857 wrote: »

We purchased our property from our landlord in March 2014 for £125k, the valuation was £160k.

The current market value is roughly £250k, the house prices have sky rocketed since last year and we have completely renovated as we planned to stay for the long term.

CLAPTON wrote: »

if it has been your primary (or only ) home since you bought it, then there is no cgt as primary homes are exempt

But people will look at the price you paid for it and may be put off what you're going to ask for it.

stacey4857

Perhaps if we didn't live in London and the flats didn't sell in around 5 days then yes that might be the case but as it stands the flats are very sought after so I'm not worried in the slightest and it's been completely refurbished so that goes our favour.

dresdendave

Mojisola wrote: »

But people will look at the price you paid for it and may be put off what you're going to ask for it.

Surely if the asking price is appropriate for the flat, based on condition, location and what other similar properties are selling for, then the purchase price several years earlier is basically irrelevant?

stacey4857

Similar properties are actually going for more than my conservative guesstimate, most of which were purchased previously for a fraction of what I paid.

Mojisola

stacey4857 wrote: »

Perhaps if we didn't live in London and the flats didn't sell in around 5 days then yes that might be the case but as it stands the flats are very sought after so I'm not worried in the slightest and it's been completely refurbished so that goes our favour.

dresdendave wrote: »

Surely if the asking price is appropriate for the flat, based on condition, location and what other similar properties are selling for, then the purchase price several years earlier is basically irrelevant?

As stacey is in an area where everything sells quickly, it won't be an issue but buyers do look at previous sale prices and will be put off if the sale price is a lot more.

dresdendave

Mojisola wrote: »

As stacey is in an area where everything sells quickly, it won't be an issue but buyers do look at previous sale prices and will be put off if the sale price is a lot more.

We may have to agree to disagree on this but I still feel the previous purchase price will have minimal bearing on the desirability of a property. Is it good value at the current asking price? That is what matters, certainly to me when purchasing a property.


My parents purchased their 4 bed detached for £22k in 1976 and now similar properties are selling for £650k, would prospective bidders be put off by this blatant profiteering if they tried to sell at current market value?

booksurr

dresdendave wrote: »

My parents purchased their 4 bed detached for £22k in 1976 and now similar properties are selling for £650k, would prospective bidders be put off by this blatant profiteering if they tried to sell at current market value?

hardly a relevant comparison given OP purchased in 2014 and will be asking +100% after "only" 2 years

however you are quite correct that it will sell for what the market thinks it is worth. Some will try to negotiate down if they suspect profiteering by the OP, others won't. Neither you nor mojisola are solely right, as ever the right answer is somewhere in between because it involves decision making by real people (many of whom are irrational)

Mojisola

dresdendave wrote: »

We may have to agree to disagree on this but I still feel the previous purchase price will have minimal bearing on the desirability of a property. Is it good value at the current asking price? That is what matters, certainly to me when purchasing a property.

My parents purchased their 4 bed detached for £22k in 1976 and now similar properties are selling for £650k, would prospective bidders be put off by this blatant profiteering if they tried to sell at current market value?

Like you, there will be buyers out there who only compare the price with other properties for sale at the same time but a big increase in price in a short time is something that gets negatively commented on in forums.