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Government’s leasehold ban sees big developer values plummet

  • 21/12/2017
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Government’s leasehold ban sees big developer values plummet
The value of listed house builders dropped sharply following the government’s leasehold ban and plans to set ground rents to zero on new builds, announced today.

By just after midday, Berkeley fell 1.35% to £41.56 on the news and Persimmon was down 1.1% at £26.93.

Retirement housing builder McCarthy and Stone fell the furthest, down 9% at 154.5p, as it is expected to make £33m from the sale of ground rents in 2018 and believes it should be exempt from the legislation.

The government’s move followed the Department for Communities and Local Government’s (DCLG) consultation paper out in July ‘Tackling unfair practices in the leasehold market’, which got a massive 6,000 industry responses.

Problems the government aimed to target include escalating ground rents, the sale of the freehold in order to make a substantial profit, and the rise in fees and premiums to leaseholders.

Builders have increasingly made new properties with no shared areas leasehold, instead of freehold, allowing them to sell the contracts on at a profit, often on Help to Buy new build homes.

In August, Countryside Properties began buying-back controversial leaseholds with clauses that double ground rent every 10 years.

Earlier this year, builder Taylor Wimpey set aside £130m to tackle the problem with its leasehold properties – a bill which hit profits by 24% in the first half of the year.

Communities secretary Sajid Javid said: “It is unacceptable for home buyers to be exploited through unnecessary leaseholds, unjustifiable charges and onerous ground rent terms.”

“It’s clear from the overwhelming response from the public that real action is needed to end these feudal practices.”

The Conveyancing Association argues that leasehold should only be applicable where there are genuine shared amenities and the term of the lease should be 999 years with a peppercorn ground rent, if commonhold is not a better solution.

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