House Prices Are Cheaper in 2023 Than They Were in 2007 (in REAL TERMS)

House Prices Are Cheaper in 2023 Than They Were in 2007 (in REAL TERMS)

9:45 AM, 30th October 2023, About 8 months ago 13

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According to HM Land Registry, the average sold house price at the peak in September 2007 was £190,032. However, as of August 2023 that figure is £291,044.

But surely that’s a gain of £101,032 I hear you say!

Well, from a tax perspective, it is, and if you had purchased an average property in September 2007 and sold it in 2023 you would have paid a whopping £28,283.26 in Capital Gains Tax (assuming it wasn’t your own home).

However, here’s the rub. If you enter the numbers into the Bank of England inflation calculator this is what it returns …

So, assuming you built your property rental business over the last 15 years but now want to sell a few to reduce your exposure to financing costs you’ve got a bit of a CGT problem to deal with.

The good news is that there are solutions.

How does this help?

The company acquires the business (including the properties) at market value.

The capital gains are rolled into the shares.

If your company sells properties for the value it paid for them there is no capital gain to be taxed.

You would only pay the Capital Gains Tax if you were to sell the shares.

What about Stamp Duty and the costs of refinancing though?

That’s a great question, but not a simple one to answer. You will need us to calculate and compare the savings on CGT against the costs of Stamp Duty and refinancing. There may be no cost, depending on your circumstances, but there will always be legal costs to make the transition. However, without knowing the numbers you would be reliant on luck rather than judgement to make a decision. Why on earth would anybody do that? Well, cost perhaps!

The really good news is that we only charge a fixed fee of £400 to look into these scenarios for you, and we can also point out other pros and cons as well as tax and non-tax-related features and benefits of incorporation over and above private ownership.

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  • For the avoidance of doubt, we are able to assist landlords who own properties in England, Northern Ireland, Scotland and Wales. Where you reside is not a problem, even if you are resident outside the UK.

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Mark Alexander - Founder of Property118

19:54 PM, 29th October 2023, About 8 months ago

Here’s another interesting thought on those numbers.

If you had invested say £50,000 into a 25% deposit and purchasing costs in 2007 you would now have over £150,000 (less tax) plus or minus and rental profits or losses.

Even after factoring in inflation, that’s a pretty good return on investment when you consider its “as safe as houses”.

Easy rider

9:15 AM, 30th October 2023, About 8 months ago

That’s just using the CPI Calculator. It would be £348,445 if you used RPI.

CGT is an unfair tax on inflation. BTL portfolios should be allowed to be held in ISAs.

Mark Alexander - Founder of Property118

9:20 AM, 30th October 2023, About 8 months ago

For those who didn’t invest £50,000 into BTL with a 75% mortgage in 2007, their money would be worth just under £81,000 even if they had managed to invest it to keep up with CPI.

Is BTL really dead?

People have been saying BTL was has been dead since 2007 and ever since. How wrong they were!

Easy rider

9:32 AM, 30th October 2023, About 8 months ago

Reply to the comment left by Mark Alexander - Founder of Property118 at 30/10/2023 - 09:20
BTL worked out well because of the 2008 banking crisis. Almost a decade and a half of virtually free money fuelled the house price fire.

A prolonged period of normalised interest rates will probably not only extinguish the fire, the resultant floodwaters could wash away a decade’s worth of profit.


11:06 AM, 30th October 2023, About 8 months ago

Just wondering, do I own the only properties in the UK that were selling around £75k in 2006 and are still selling around £75k in 2023?

Mark Alexander - Founder of Property118

11:08 AM, 30th October 2023, About 8 months ago

Reply to the comment left by Morag at 30/10/2023 - 11:06
That’s averages for you. Some will have done a lot better than average.

Where are your properties?

northern landlord

11:52 AM, 30th October 2023, About 8 months ago

While incorporation may make sense for some landlords with larger portfolios who intend to stay in the PRS it is not for everyone. There is always the fear that due to the government’s apparent hatred of Landlords that schemes like this when applied to the PRS will come in for some specific unwanted attention at some point.
What is interesting are the house prices. We are always being told it was so much easier to buy a place in the past and this is a source of resentment now, but was it really easier? Sure, average prices were lower in the past at £190,032 in 2007 but what about earnings? In 2007 the median salary was £24,043. So a house was 7.90 times earnings. Now the median salary is £33,000 and the average house is £291,044 or 8.81 times earnings so not a huge difference. Houses have always been expensive. If you take the average salary in 2007 of £24,043 and put it in the calculator it should be £38,803 if wages had kept up. So in real terms we are some 17.5% worse off than we should be, an approximate indication of how our living standards have dropped since 2007.

Mark Alexander - Founder of Property118

12:02 PM, 30th October 2023, About 8 months ago

Reply to the comment left by northern landlord at 30/10/2023 - 11:52
I agree with everything you have said except for one. Incorporation and the associated reliefs are not a "scheme". They are cast in legislation for the specific purpose of not imposing artificial taxation on businesses as they evolve. Accordingly, incorporation is also within the spirit of the legislation, not just the letter of the law.


12:11 PM, 30th October 2023, About 8 months ago

Reply to the comment left by Mark Alexander - Founder of Property118 at 30/10/2023 - 11:08
My remaining flats are in Springburn, North Glasgow, about 25 mins walk from the heart of the City Centre. Even the best performing flats and houses I bought back then have only increased by about 50%, and they're in an area which is only recently rising fast because of the general shortage and unaffordability of the more fashionable West End and South Side.


13:22 PM, 30th October 2023, About 8 months ago

Reply to the comment left by Morag at 30/10/2023 - 11:06
No! Like thousands of others who thought they were investing in a 'pension' to combat Brown's raid on private pension funds, I invested in a couple of leasehold flats in the North in 2007. They've been a disaster. I recently sold one at a £10K 'profit' on the purchase price, but had lost £20K+ due to a single feckless tenant. I have another which I cannot sell due to leasehold/cladding issues. The going rate is £30K below the purchase price in 2007, so I can't remortgage and am paying nearly as much as the rent.

These are not major problems for me because I've done OK on other properties over the past 25 years. But many aren't so lucky, and are facing wipe-out, while their tenants are sitting pretty.

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