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Once, investing in bricks and mortar was as safe as houses. But these are strange days. Professional opinion is split – some suggest caution, while others actively discourage investing in property at the moment. This is because the property market is dangerously overvalued and a slump in prices is overdue. ‘Of all the overpriced asset classes out there – and believe me, there are a lot of them – residential property has to be about the most peaky looking,’ says John Stepek of MoneyWeek.
Property market predictions aside, there’s some other bad news to get out of the way. If you invest in a second home, you will be liable to pay Capital Gains Tax on any profit when you come to sell. It will also probably push you into the Inheritance Tax bracket (currently 40 per cent of assets over £275,000), and imagine the wrinkles if the property develops a catastrophic fault such as subsidence... In addition, Gordon Brown – who was going to allow a range of investments, including second homes, to be put into Self Invested Personal Pensions (SIPPS) – changed his mind. This is because, while it would have meant a 40 per cent ‘discount’ on second homes, low-earners and first-time buyers would be further squeezed out of the housing market by second-home buyers pushing up prices.
A return to confidence >>
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