There’s been shock and anger from agents - especially those in London - at the surprise news of an additional three per cent stamp duty on buy to let and second homes.
George Osborne made the surprise announcement in his Autumn Statement, alongside a pledge to encourage a vast house-building programme and to extend the Help To Buy programme by a year to 2021.
Some £1 billion which he believes the new stamp duty will raise by 2021 will fund some of the new homes, Osborne says. Up to £60m will go to communities in England where the Treasury says the impact of high numbers of second homes has been "particularly acute".
“This is penalising London workers who have a pied-a-terre from Monday to Thursday throughout the week and return to the family home during the weekend” says Faisail Durrani, head of research at Cluttons.
“This additional SDLT will hit confidence in the London market, at a time when emerging market currencies are under tremendous pressure due to the faltering of global economic growth. It’s a double whammy for international buyers because taxes will increase and weaker currencies mean UK investment properties are more expensive” he says.
Lucian Cook, head of research at Savills, says this is merely the latest tax burden to fall disproportionately on London buyers and investment landlords.
”This will further suppress transactions and prices in the prime central London market, given the extent to which this market has been supported by purchases from second home owners and investor buyers. More generally, buy to let investors are likely to display greater caution faced with higher transaction costs. This is likely to be greatest among those with substantial debt who are also affected by the changes to tax relief that were announced in the July budget” he says.
“The increase in stamp duty, while good for first time buyers, could have quite a negative impact on buy to let investors and subsequently the rental market. This may ultimately lead to a shortage of good quality properties or an increase in rent, which could make it much more difficult for tenants” says Jamie Lester of Haus Properties, a three-office south west London estate agency.
“This is short-sighted by the government as they have failed to address the slowdown at the top-end of the market ... The Chancellor could have put new, fairer stamp duty levels in place as so many London family homes, even in secondary areas, breach the £1.5m+ barrier” suggests Robin Paterson, chairman of Sotheby’s International Realty UK.
Jonathan Adams, director of another prime central London agency, Napier Watt, says: “Buy to let mortgage holders will potentially have to pay up to 15 per cent stamp duty on future purchases and lose out on mortgage interest tax relief. The result? Fewer landlords will come into the market, there will be a lack of supply and rents will rise. The other issue is that because the stamp duty hike won’t come in until April, we could see a rush of landlords buying before then, further pushing up prices in the short term.”
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Example a BTL at £1m in March 2016 would be £43,750 SD Tax
Come May an investor would be paying £73,750 SD Tax
The timeline for landlords is
* April 2016 - SD Tax see's massive hikes
* 2017 to 2020 - BTM mortgage offset relief gets hit, rental income gross takes place of net, worsening year by year
* April 2018 - The 2011 Energy Act kicks in next stage where minimal standards estimate that 10% of res and 18-20% of commercial premises become unlawful to let
I estimate a 30% shift of BTL properties changing hands due to legislation changes coming in. Letting agents - its time to start opening sales departments. The shift is coming.
Buyers will simply knock off the extra SDLT from their offer prices - stop getting too excited.
Sellers will either accept or not
Simplz.
30% changing hands? so you appear to be predicting great business ahead as a result of these changes - Well done George!
I can't believe I'm writing this, but I actually agree with Osborne on something. The buy-to-let bonanza needs to be brought under control. It's gone crazy in the last few years, in part because of Osborne giving buy-to-letters a load of tax breaks in the first place (but that's by the by).
We hear all the usual complaints. It will put off landlords/investors from investing! Rents will go up! Supply will go down! This is not what we need!
Well, maybe if buy-to-letters stopped hoovering up all the stock to make a fast buck we wouldn't have so much of a supply issue. Maybe housing could once again be seen as a basic human right, rather than an investment opportunity. Maybe we'd then become a nation of homeowners rather than renters again.
On the other hand, it's quite funny to see Osborne bite the hand that feeds him. All these buy-to-letters no doubt voted for the Tories in the election, thinking their investment and business interests would be protected. Now they're realising, like everyone else, that the Tories are quite happy to screw everyone over.
It will affect renting market particularly London & surrounding areas
@ John - in a way its clever. Create a industry bubble that people nationally have got into. ie the buy to let clubs and buyers. Then when cooked, bang in lots of taxes and tariffs. For people to exit pricing will have to be right what with energy upgrades etc. What doesn't get compromised is the SDT as a fixed cost. V Clever.
@ Rob - great biz for those that can negotiate sales, maybe not so good for landlords with high LTV buy to let mortgages, or landlords with tired props that will fall unlawful needing £1,000's spending to upgrade energy wise.
But for sure forcefully a changing market ahead
Property purchase of £40,000 to £125,000 – Stamp Duty will be levied at 3% (currently 0%)
Up to £250,000 – 5% (currently 2%)
Up to £925,000 – 8% (currently 5%)
Up to £1.5m – 13% (currently 10%)
Over £1.5m – 15% (currently 12%).
As I have said before, Osborne is dastardly clever, he has a plan and politically he believes he can sacrifice private landlords (Lettings agents go without saying) on the alter of his greater ambitions, I think fighting this would be a pointless waste of energy, time to adapt or opt out I'm afraid
@ Simon - agree - when the Gov makes rules, the rules come in.
Bar HIPs and poll tax most stick and in cases changes can open up opportunities for early adopters.
My guess is that several larger institutions and cash rich pensioners downsizing will see BTL opportunities in longer term ventures, playing on high LTV landlords bailing out.
Buying a great rental at 5-10% discount may warrant 3% higher SDT. Equally lettings only agents may have stock direct from source to offer for sales.
Change the rules and you get to play the game differently.
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