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Tax Changes Could Shake Up West Wales Housing Market

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A SHAKE-UP in capital gains tax could trigger the West Wales housing market into life, according to a property insider.

After yesterday’s Queen’s Speech, capital gains tax on non-business assets is to be imposed at rates close to income tax, meaning higher-rate taxpayers may have to pay as much as 50% on their profits from selling second homes.

Before yesterday, the tax on profits made on house sales stood at 18%, minus any deductible costs.

Such a move could have major implications on the second homes market, with Wales’ coastal areas especially vulnerable to the changes because of the high levels of second home ownership.

The Pembrokeshire coast is a particularly attractive option for second home owners, drawn to the area by its natural beauty and tranquil lifestyle.

Dominic Subbiani, a partner at West Wales-based FBM estate agency, said the firm has taken calls from people worried the changes could mean second home owners facing tax bills of tens of thousands of pounds.

He said: “It’s going to get extremely tough. Second homes are a huge part of the market in coastal Pembrokeshire — up to 40%. Plenty of people bought them instead of pensions, typically spending £250,000.

“They don’t make more than maintenance money from letting — usually about £10,000 a year — and were either going to retire to them or call in a nest egg.”

According to analysts, a vast sell-off could destabilise the recovery in coastal hotspots and attractive rural locations, where up to 50% of buyers in upper price ranges are purchasing a holiday home.

However, it could also make the market more attractive for local buyers, increase the number of properties being put up for sale and lower prices.

House prices in areas like Pembrokeshire, as well as Ceredigion, Carmarthenshire and Gwynedd, have soared over the last decade or so, outstripping rises in wealthy parts of England and pushing homes well out of the reach of local buyers.

Carol Peett, who runs the Milford Haven office of the County Homesearch Company, a specialist homefinding service, argued that the changes to CGT could be positive.

“I’m hoping that the Government will bring this in to the exclusion of businesses,” she explained.

“The thing that is really important to the rural community down here is letting cottages. A lot of farmers have converted farm buildings to supplement their incomes by letting them out.

“I’m fairly confident that the Government will exclude businesses from this CGT change and therefore those people will not be hit.

“The people who will actually be hit will be the second home owners.”

Ms Peett said the changes would not hit second home owners who have bought properties to retire to, because they are not looking to sell their homes.

Ms Peett added: “Another possibility is that the Government might consider having a different scale of CGT the longer a property has been owned and I have a feeling that might be the case.

“The other thing that is positive is that if people do sell then it’s good for the local market, it will get it moving and will possibly bring prices down.

“It’s not totally doom and gloom,” she said.

“It will affect a few people, of course it will – but I don’t think it’s going to be a massive hardship.”

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