The Daily Telegraph - Saturday - Money
...but could Hong Kong buyers save it? Mortgage snub for the self-employed
Demand from Hong Kong buyers who move to Britain on the new visa scheme could help to boost London’s struggling market for high- end homes, agents have said.
Sales of luxury property, particularly flats, in the capital have been hit hard during the pandemic. Hong Kong buyers, who largely favour apartments, may fill this gap, while others may take advantage of lower rents in the capital, pushed down by the impact of the pandemic.
Travel restrictions have put off international buyers, a group that usually makes up a large proportion of purchasers. The percentage of homes in prime central London sold to buyers from overseas dropped from 45pc in 2019 to 38pc in 2020, according to Knight Frank, the agent.
Edward Heaton, of buying agency Heaton and Partners, said there was likely to be a tidal wave of overseas buyers once travel restarted, with those based in Hong Kong leading the surge.
“We have seen a 30pc uptick in inquiries from Hong Kong in the past few weeks. The vast majority are from returning expats, choosing to leave now as a direct result of the current political disruption,” he added.
London Central Portfolio, an investment consultant, reported a 41pc increase in interest from Hong Kong buyers, with more than half looking for a home rather than an investment.
About 5,000 Hong Kongers had already signed up to a new scheme allowing them to move to Britain under a special visa within two weeks of its opening on Jan 31. The Government expects about 300,000 people to make use of it in the next five years. That is roughly equivalent to the population of Newcastle.
Hong Kongers taking up the new visa offering may also be able to avoid the stamp duty surcharge to be introduced for international buyers on April 1. Buyers living in the UK for 183 days in the year either before or after their purchase will be exempt.
Last year, 8pc of home sales in the most expensive areas in London were
Self- employed mortgage borrowers could miss out on the rumoured extension to the stamp duty tax holiday, as brokers warn that lending restrictions may continue into next year.
Banks and building societies have continued to tighten their lending rules for self- employed borrowers, in stark contrast to the rest of the mortgage market where affordability restrictions are being gradually eased.
In some cases, lenders are asking these borrowers to raise a 40pc deposit before granting a loan. On the average home, this would amount to £91,899.
In other instances, banks are turning away borrowers who show a loss on their business accounts.
Chris Sykes, of mortgage broker Private Finance, warned that these restrictions would likely continue into next year despite the ongoing vaccine rollout. Mr Sykes said: “We will see this higher scrutiny into 2022, so self- employed borrowers could indeed miss the stamp duty deadline because of this.”
Before the pandemic, self-employed applicants would have to provide two years of accounts to prove they could afford the monthly repayments. Now, lenders ask for multiple business bank statements to ensure their work hasn’t been affected by Covid. One couple, self-employed decorator Christopher Payne and his partner Maria Ionita, an NHS nurse, were rejected for two mortgages, despite having a 35pc deposit, due to a loss in Mr Payne’s business accounts. Mr Payne said: “Two banks rejected us; the whole thing wasted about six weeks. I had a small loss on my limited company last year. “I tried to explain that I spent a lot of money on the business last year doing up the vans, but they just said, ‘ No, we’re not lending to you.’ They weren’ t looking at us on a caseby-case basis.” While smaller lenders are more willing to look at borrowers on an individual basis, high street banks are usually less inclined to do so. Paul Coss, of Haysto, a mortgage broker, said: “Despite self- employed people usually earning more money than if they were on a salary, mortgage lenders just aren’t set up to deal with complex incomes.” Mr Sykes added: “Due to all of this additional scrutiny, it can take a few weeks or longer for a self- employed person to get a mortgage these days.”
The number of first- time investors over the age of 50 has more than tripled during the pandemic, according to investment shop Freetrade. It reported that the share of new investors on its platform aged over 50 shot up from 4.7pc to 14.2pc last year.
Millions of people have seen their disposable income grow during lockdowns as a result of reduced spending. Many have put the spare cash into markets in a bid to generate returns.
Nigel Alexander, 68, from London, said he decided to try to play the markets with the extra money he had set aside. Mr Alexander has invested in passive funds, which track entire markets, as well as a few individual stocks, including a medical cannabis producer and an American genetic disease research company.
He said: “I decided to give it a go and invested in areas that I think will become significant in the future.”
Laith Khalaf, of fund supermarket AJ Bell, said it is natural to start thinking about playing catch-up with your savings closer to retirement, and investing is a good solution at a time when interest rates on cash are so low.
He said: “Many people find their finances loosen up in their 50s, after their mortgage is paid down, and childcare costs fall.” Mr Khalaf said low-cost index trackers are a good starting point for those who are unsure about how to select funds. He said: “These won’t outperform markets, but they will keep pace with them, minus charges. The iShares UK Equity Index fund tracks the British stock market, and costs just 0.04pc a year.”
Dan Lane, of Freetrade, said it’s never too late to build up extra retirement income. Someone starting to invest at 50 with a £25,000 lump sum, who then invested £12,000 per year, could have set aside £205,000 by age 65. This could be worth £310,000 with investment returns.