Impending VAT Rise Creates Buzz in the Auction Room - 10/10/10
The 2.5 per cent rise in standard rate VAT to 20 per cent comes into force on 4 January next year and will generate more than £13.4 billion a year for the Treasury.
VAT is payable on adviser's costs including legal fees, surveys and conveyancing fees as well as search fees and refurbishment costs. As a result, many investors are considering buying now to reduce costs.
As well as beating the VAT rise, buy to let investors are making the most of a ten year rental boom, snapping up property bargains before stock shortages drive prices up.
Chris Baguley, Director at lending specialist Auction Finance Limited, said:
"We're seeing a spike in interest from bidders keen to boost their portfolios with bargains at auction and furnish their properties ahead of the January increase. The VAT increase was one of the most controversial elements of the Budget and investors are keen to minimise the impact. It's a particularly good time to boost a portfolio as demand for rental property has rocketed and beating the VAT rise could save vast amounts of money.
"Many investors plan to furnish their property prior to let, and buying now will mean cheaper furniture and electrical items. Retailers have been hit hard by the recession and are already working to slim margins. This means it's likely the tax rise will be passed directly onto the consumer in January.
"The rise will be an additional and unwelcome cost for investors keen to take advantage of tenant demand."
UK rents hit a record high in September, standing at an average of £689 per month. This surpasses figures seen in August 2008, the previous market peak.